Method and system for optimal pricing and allocation for a set of contractual rights to be offered with canceling/modifying of indications of interest

ABSTRACT

A method and system for the determination of optimal pricing and allocation of securities in an open, competitive environment. The method and system may also be used in developing pre-markets of other items that are difficult to price and allocate in a competitive manner, such as the underwriting/securitization of contracts for property; future revenue/earning streams from an asset and/or group of assets; underwritten insurance portfolios, intellectual property and other goods and services. The system of price optimization and allocation is accomplished by interactive feedback of information using a display and including competitive participation of individual members of the public (and/or their agents) or institutional buyers over a data network e.g., the Internet, uncovering the nature and identification of demand in a self-organizing fashion. Demand emerges through participants&#39; interaction with the system and with each other, via a graphically-supported, interactive reservation process.

CROSS REFERENCE TO RELATED APPLICATION

This application claims priority to U.S. Provisional Application No.60/550,963 filed Mar. 5, 2004 by Inventor N. Caleb Avery, entitled “Amethod and system for optimal pricing discovery and allocation prior tooffering new issuances of securities and other items of a potentialissuer to a potential buyer”, incorporated herein by reference in itsentirety.

COPYRIGHT

A portion of the disclosure of this patent document contains materialwhich is subject to copyright protection. The copyright owner has noobjection to the facsimile reproduction by anyone of the patent documentor the patent disclosure, as it appears in the Patent and TrademarkOffice patent file or records, but otherwise reserves all copyrightswhatsoever.

FIELD OF THE INVENTION

This invention pertains generally to pricing and optimal pricing and,more specifically, to optimal pricing and information distribution inconnection with computer enabled allocation and sales of items such assecurities but not so limited.

BACKGROUND OF THE INVENTION

Subject matter of this disclosure pertains to the financial servicesindustry, but it is not so limited. Financial services consist mainly ofinformation flow from the customer to the broker (investmentinformation); from customer to broker (placing orders); broker to marketcenter (order entry); market center to broker (order execution); andfinally, back to the customer (execution confirmation). Hence, they lendthemselves to communications via electronic media such as the Internetand other data and computer networks.

One aspect of the financial services industry is new issuances to offerand issue shares of stock and/or debt in a company or entity to thepublic. This process of identifying potential buyers and gauging theirdemand is referred to in the investment banking field as book building.In non-securities based applications this process is called building anorder boo. The current process of book building by investment bankerstypically includes several stages. In the first step, the underwriter orinvestment banking firm determines which investors will be invited toparticipate. Typically this involves certain favored investors. Next,the underwriter obtains indications of interest from those invited toparticipate. These might be in the form of bids of various types. Atthis point, the underwriter has an appreciation of the demand curve forthe new issue, including and when bids were submitted and/or revised. Atthis point, the underwriter arrives at an issuance price, although it isnot understood how this is done by those outside the investment bankingcommunity. As a result, there is frequently oversubscription, where moreshares or debt instruments are requested than are available. There havebeen a number of techniques used to deal with oversubscription; forinstance, distribution of shares on a pro-rata basis.

In general, this process is believed to be relatively inefficient andunattractive, at least from the standpoint of the issuers. As currentlycarried out, book building is neither democratic nor equitable nor opento the public. A number of abuses have been identified in the currentsystem. One is spinning of shares in the so-called “hot” (highly indemand) initial public offerings to favored investment banking clients.Amongst abuses in addition to the spinning problem are underpricing byinvestment bankers of initial public offerings. It is believed thatunderpricing has certain advantages for investment bankers but deprivesthe issuer of funds creating a “conflict-of-interest” between theinvestment banker and their customer, the issuer. It is believed thatunderpricing occurs both with equity (stock) and with debt issuances.Other abuses include “tie-ins,” unlawful quid pro quo side agreements,yield burning, artificial inflation of after-market prices in thesecondary market (“laddering”), and biased recommendations by researchanalysts working for investment banks.

Underpricing is believed especially to damage the issuers and themarkets. Also connected with underpricing abuses is post-issuanceflipping, i.e., immediate sales by the favored recipients of initialpublic offerings. In addition, current approaches do not provide forquantity discounts for large purchasers, or purchasers who help set theprice with early indications-of-interest. Furthermore, as a result ofits monopoly power in pricing new issuances, the underwriting industryfaces antitrust issues.

In addition, there are globalization issues in connection withsecurities offerings due to the presence of competitive internationalmarkets and differing regulations between countries.

People have recognized these problems and some solutions have beenimplemented; however, all are unsatisfactory. One method is directpublic offerings of securities via the Internet. There have been over200 direct public offerings carried out via the Internet in the UnitedStates. They typically involve relatively little participation byunderwriters with instead the issuer offering the equities direct to thepublic. Of course, this system does not provide any actual specificpricing mechanism.

Other approaches to new issuances include Internet options such as thewell-known Dutch auction of initial public offerings. In this case, mostof the pricing and allocation decisions are removed from the discretionof the issuer and/or underwriter. Investors express their interest leveland price threshold, and the offering price is set at the highest levelat which all the shares to be offered might be sold (i.e., the “clearingprice”). Any bidder might bid for as many shares as he wants. The actualoffering price is fixed at the maximum price at which all shares arecleared (sold) with regard to the portfolio of bids. Allocationsometimes includes reduction of the number of shares offered to eachbidder, perhaps on a pro rata basis.

There are drawbacks to Dutch auctions. First, there is lack oftransparency and feedback in that the bidders are bidding “blind” andare typically uncertain as to what other bids are being offered.Consequently, there is little or no information provided back to thebidders, except perhaps informally. Because of the lack of feedback,Dutch auctions also typically exhibit underpricing problems. Thecompany's investment bankers often still set the final offering price attheir discretion, since they can manipulate the number of shares onoffer and hence the price. Uncertainties regarding bids, and the lack ofconsistent methods of valuation and related pricing information,constitute an inadequate approach to determining appropriate initialprices, thereby minimizing attractiveness of the Dutch auction, at leastin the United States equity market.

Another approach which has been used is an new issuance entirely viaelectronic mail, involving the issuer taking conditional offers to buyshares without deeming it to be a pre-effective sale under the U.S. SEC(Securities Exchange Commission) rules. In this case, the issuercirculates an e-mail notice after posting a prospectus on the Internet.Bidders are allowed to bid on the shares after opening an account to doso.

Then, before the actual effectiveness of the registration statement inconnection with the stock issuance, an e-mail notice is sent requestingreaffirmation of the offers to buy without an actual commitment to buy.Subsequently, after the registration statement of the issuance iseffective, an e-mail notice is sent to each bidder stating that theoffering is about to price, and that the offers will be binding unlesswithdrawn immediately. Again, this approach includes no particularprovision of providing bidding information back to the bidders.

Similar options have been used in the debt market; for instance, formunicipal bonds issued by public entities. These consist primarily ofnumerical auctions. Typically, the bidder cannot see all bids and onlythe latest best price (i.e., lowest yield) is visible. However, exceptfor the auctions of U.S. Treasury securities, auction systems for othertypes of debt instrument have been relatively rare.

SUMMARY

There are clearly a large number of shortcomings and abuses in thecurrent book building system, and the existing electronic auction typesystems do not solve all of these issues. The present inventor hasidentified the chief problem with the current approach as beinginadequate information provided to the prospective purchasers ofsecurities or other items. This is typically most problematic wherethere is no clear price or value on the item being sold, such as newissue securities, especially equities, but not so limited. Typically,none of the current approaches provide much useful information about theother bidders and their bids, or provide feedback as to a given bidder'slikelihood of getting an allocation. For instance, in the Dutch auction,the information flow is one way, from the bidders to theissuer/underwriter.

Therefore, the present system is directed to providing information backto the bidders so that they might make or modify their bids in light ofthe other bids, thereby gaining a sense of what the relevant market(i.e., the other bidders), believes the value of the security or otheritems being sold to be. Hence, bids might be modified over time inresponse to bids made by other bidders. This competitive, transparent,dynamic, and interactive close-loop bidding system enables bidders toarrive at a true market value of the securities or other items, prior tothe actual closing of the offering, e.g., the actual sale.

The present system (hereinafter System or system) and its associatedmethods are flexible so as to be implemented in a variety ofembodiments, which might accommodate the applicable securities laws andregulations of any given legal and/or regulatory marketplace and/orcontractual jurisdiction for non-securities-based items (i.e., locallyin a given jurisdiction and/or globally across jurisdictions). Thenumerous financial markets, exchanges, and contractual jurisdictionsaround the world contain their own particular set of relevant legal andregulatory requirements. Furthermore, the system can also be applied toprice discovery and allocation of non-securities-based items andcontracts for items that are difficult to price and to allocate fairlyand efficiently.

The system is equally applicable to the price discovery and allocationprocesses of new issuances of both equity and debt (including but notlimited to: commercial paper, corporate bonds, municipal bonds,international bonds, sovereign debt, etc.), alike (as well as ofnon-securities-based products and items, services, and rights). For thepurposes of illustration and discussion, this disclosure also uses theset of circumstances surrounding initial public offerings (IPOs) ofequity, for reasons including:

-   -   1) The problems of price discovery and allocation in IPOs are        perhaps more fully academically researched and documented than        in new issuances of debt and/or contracts or other        non-securities-based items and applications;    -   2) first time issuers of public equity securities are typically        earlier-stage enterprises and are thus potentially more        vulnerable to underwriting and manual book-building abuses than        issuers of sovereign, municipal, public or corporate debt, which        tend to represent established organizations or governmental        entities with track records of financial performance, or the        underwriting/securitization of other items, (e.g., property        portfolios, future revenue/earnings streams of financial        instruments and/or contracts, other asset types, good/services);    -   3) the potential for inequity and abuses in the IPO process        might be more inherent, and therefore more prominent and        exaggerated than in new issuances of debt or the securitization        of a contract, and thus serve the purposes of illustration of        the methodology and system concepts and this discussion;    -   4) there exists a more advanced stage of criminal and civil        legal discovery of the abuses of the IPO process, and thus a        significant amount of evidence is accumulating and is        actionable;    -   5) there is an escalating resulting perception of inequity and        scandal in reaction to abuses of the IPO process; and    -   6) higher visibility and increased awareness of the problems        could lead to implementation of pricing optimization and        improved allocation in other securities areas, and in a variety        of applications.

The present system provides a method of determining optimal pricing(i.e., price discovery) and the fair allocation and reservation ofrequests (i.e., “indications-of-interest”) prior to the offer or offerfor sale of the actual equity and/or debt or referenced securities,related instruments, and/or other assets also called units here. Thesystem does this interactively with all Participants by establishing thenature of demand in the pre-market through feedback, thus enablingdemand behavior to emerge as the pre-market self-organizes. The itemsbeing priced (e.g., particular securities, commodities, securitizedassets, units of services, etc.), are substantially identical and hencealso referred to herein as units.

The present system is also useful in pricing discovery and allocation ofnon-securities-based items. For example, the system can be used toanalyze, price, hedge, and allocate risk during the process of insuranceunderwriting. In another example, the System can also be used to priceand allocate a portfolio of assets (e.g., real estate) that have beenpackaged and securitized. The System can also be used to price andallocate the securitization of one or more agreements for the benefitsand/or outputs of contracts or similar instruments (e.g. a revenue orincome stream, royalties from intellectual property, etc.). The systemcan be used to price and allocate units of goods/services by building anorder book. Furthermore, the system can also be used in instances wherethe supply might also be varied by the Issuer or Seller, based on theemerging demand discovered by Participant interaction (e.g., pricing andallocating a production run of semiconductor chips which can be expandedby increased production).

This process is accomplished fairly and efficiently by interactivecollection of indications of demand and real-time feedback display ofthe aggregate demand to all Participants through a private and/or publicdata network (e.g., the Internet). Various embodiments do this byestablishing and building what is referred to here as a Bidstream of thedemand for an anticipated new issuance, or the sale of a multiplicity oflike goods and/or service units through what is referred to here asReservation Rights. The Bidstream can be represented by a graphicdepiction of Reservation Rights BidBlocks, which can be organizedhorizontally and/or vertically on a visual display, called a DemandDisplay screen. A BidBlock is a place in the Bidstream representing oneor more Bidstream units. By selection of a limit to the number ofBidBlocks or units at a given price/volume, an Implementer of the systemcan choose whether or not to give a particular Bidstream a recognizablevisual appearance to aid Participants in analyzing the emerging demandas the pre-market self-organizes.

Typically (though not always) in securities applications, a ReservationRight is not a legal and binding contractual obligation, nor aninvestment contract. Rather, a Reservation Right request represents an“indication-of-interest” or reservation based on potentialinvestor/buyer feedback of demand for volumes and prices of ananticipated offering of securities, related instruments, and/or otherassets, goods, or services. The Reservation Right request is essentiallya proxy for demand, and is used for the purposes of optimizing pricingand promoting fairness in allocation as a pre-market activity—a moreefficient and equitable alternative to current manual book-building ororder book building processes.

Depending on relevant securities and contractual laws/regulations,Reservation Rights could also be options, warrants, or similarconditional instruments where applicable. Where legal prohibitions andregulations do not restrict referenced securities, a more direct linkagemight be offered between the Reservation Right and the securities and/orother assets eventually being offered as they become offered or finallyavailable for sale. In the case of non-securities based applications, ifallowed under relevant contractual law, the Reservation Right can bebinding.

The system can be used not only to develop a fair, equitable, andtransparent new issuance process for equity (stock) and/or debt (e.g.,bonds, notes, commercial paper, etc.) securities (and for related and/orsimilar instruments, and/or rights), but can also provide a properlypriced and allocated base of investors for a stable after-market. Underthe present method, first-day arbitrage might be mitigated or removedaltogether, reducing secondary market volatility. If conducting newissuances is relatively easy and inexpensive, this will increase theavailability and lower cost of equity and/or debt finance. Similarly, aliquid and transparent secondary market will encourage investors toparticipate in the stock and debt markets, and should again increase theavailability of capital and lower investor's required returns. Likewise,improvements in the efficiency, transparency, competition, and openaccess of various debt markets might encourage more issuers to achievetheir goals through the efficient and appropriate use of debtinstruments, and to extend the access of debt markets to a whole newgroup of potential investors on a level playing field.

Moreover, the system can be used in a number of non-securities-basedapplications where fair and equitable pricing and allocation havetypically been difficult to optimize, determine, and execute.

In this disclosure, the terms: (1) Implementers refers to those partiesusing methods and system embodiments to design and build various pricediscovery and allocation systems; (2) Operators refers to personnel ofissuers, underwriter syndicate members, and their affiliatedbroker-dealer network and/or third-party service/portal providers whoseresponsibility it is to run and manage the daily operation of animplementation and/or embodiment; (3) Issuer Group/Seller might includethe issuer of an anticipated new issuance of securities, securitizationof assets, or any other asset/item which is anticipated to be sold andany affiliated underwriter syndicate, affiliated broker-dealer network,and, sometimes, any third-party service providers and/or portalproviders who supply services to other members of the IssuerGroup/Seller and (4) Participants refers to potential investors,potential asset buyers, buyers of goods/services and/or their agents whodownload information, place requests for Reservation Rights ofsecurities and/or other assets, goods/services, and/or otherwiseinteract with the system. In the case of non-securities basedapplications where the timing of acceptance of bids are not regulated,many times the roles of the Operator and Issuer Group are merged, andare simply the Seller of the assets, goods, and/or services.

Therefore, in accordance with the invention, a system is provided, whichis not necessarily an auction per se, but is a pricing and allocationsystem and method. The pricing method allows the Seller to choose tosell the units on sale to the bidders at other than the actual price bidby any particular bidder, and even in some cases at a price higher thana particular bidder has requested. Generally, this price adjustmentwould be by prior agreement. More generally, this disclosure is directedto a system and method for taking reservations from an allocation poolof units to be sold. Feedback is provided to those making thereservations (bidders or Participants). The feedback includesinformation on the reservation requests made by the other requestors(Participants) in terms of how many units and at what price they areinterested in buying. This information can be presented to all users ofthe System (i.e., Operators, Issuer Group/Sellers, and Participants) ingraphic format.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 is a graphic representation of potential BidBlocks available,including initial price range, and the number of units available at eachprice point that is provided to users of the system.

FIG. 2 is a graphic representation of BidBlocks available with certainBidBlocks filled in as reservations are requested, accepted, andreserved.

FIGS. 3 and 4 indicate alternative means of assisting the Participantwith respect to building the Bidstream for providing a graphicalrepresentation of the bids. These different geometric shapes offer adifferent number of potential BidBlock units at each price range andBidstream design can be used to influence Bidstream building behavior.

FIG. 5 shows an example of a Reservation Rights request calculatordisplay.

FIG. 6 shows the corresponding Demand Display provided to an exampleParticipant after accepting and registering the his requests.

FIG. 7 shows a request for an example Participant's status informationalong with those of other Participants.

FIG. 8 shows graphically the situation of reaching full subscription andtriggering oversubscription of an offering.

FIGS. 9 and 10 show how new Reservation Rights can be added and previousReservation Rights can be rescinded and/or cancelled. The Figures alsoindicate the action of notification to the holders of the cancelledReservation Rights.

FIG. 11 shows the occurrence the price range being reset and of newoversubscription Reservation Right request being accepted and reserved.

FIG. 12 shows a free-bid display example and some initial requests andsupporting tabular Bidstream summary statistics.

FIG. 13 shows graphically how new Participants place a range ofReservation Rights requests at a higher range and the changingsupporting tabular Bidstream summary statistics.

FIG. 14 shows further for the free-bid example the impact of pricingmomentum.

FIG. 15 shows further for the free-bid example what happens when theBidstream reaches the full subscription point, that is all unitssubscribed, and a new threshold floor is set for accepting newReservation Rights requests.

FIG. 16 shows following FIG. 15 what happens when newer ReservationRight requests are accepted and reserved above the threshold floor andlower bids are cancelled.

FIG. 17 shows also for the bond issue the stratification of theBidstream reflecting the terms of a set number of final instruments,coupons, or discounts/premiums from par available.

FIG. 18 shows the stratified Bidstream for a bond issue at the price ofhighest yield or spread over a portfolio of Reservation Right request.

FIG. 19 shows for a bond offering what happens when the Bidstreamapproaches the full subscription point.

FIG. 20 shows what happens when the full subscription is reached and thedemand is reset to add more Reservation Right BidBlocks at lower yield.FIG. 20 also shows acceptance of a new reservation at a lower yield, thecancellation of a previous reservation at a higher yield and thenotification to the holder of the cancelled Reservation Right.

FIG. 21 shows for a debt issuance how stratified Bidstreams can beshaped with less higher yield BidBlocks to encourage earlier informationproduction.

FIG. 22 shows a set aside block of units on a Demand Display of acurrent Bidstream.

FIG. 23 shows how in a dual Bidstream with a fixed monetary set-asidefloat, a set of units is cancelled from the set-aside and added to thepublic pool as the price range rises and moved the float in conjunction.

FIG. 24 shows a normalized Poisson overlay used to show the distributionof requests in a free-bid embodiment and to then set a threshold floorfor oversubscription requests.

FIG. 25 shows a diagram of the system.

DETAILED DESCRIPTION Overview

The present system and method are capable of building what is referredto here as a Bidstream. A Bidstream is created by the collection ofindications of demand (also referred to herein as reservations andfeedback i.e., a report) of the aggregate demand. Prior reservations canbe provided to some or all Participants. Various embodiments accomplishthis by establishing and building a Bidstream of the demand for ananticipated new issuance, securitization of rights to assets, or for thesale of units of goods/services through the Reservation Rights. TheBidstream can be represented by a graphic depiction of ReservationRights or BidBlock units, organized horizontally and/or vertically on avisual computer display, called a Demand Display screen. EachParticipant and/or their agent requests a quantity of reservations ofBidBlocks at price points in the Bidstream. These reservation requestsare then accepted and registered by the system if those BidBlocks arestill available at the time of the request. The system has the optionalfeedback of a graphic representation of all currently requested demandin the Bidstream. There are also optional feedback mechanisms for therelative position of a given Participant's accepted and registeredrequest (or set of requests) in the Bidstream (e.g., using unit blocksof a different representation i.e., color, text markings, pointers,lists, tables, etc.). Cognitive research indicates that humansunderstand, analyze, and respond more successfully to graphic visualinformation rather than to purely numeric representations and/orstatistics.

The system Implementer can choose to give a particular Bidstream asrepresented on a computer display a recognizable visual appearance byselection or not of a limit to the available number of BidBlocks orunits at a given price/volume, in order to aid Participants in analyzingthe emerging demand as the pre-market self-organizes. A computer graphicrepresentation of an outline of the available BidBlocks can be providedto the Participants all at once in the geometric continuous embodiment(FIG. 1), or in a sequential step-function with BidBlocks filled in asreservations are requested in the geometric step-build embodiment (FIG.2), where each Reservation Right is shown as a rectangle whose lengthrepresents the number of BidBlock units reserved along the horizontalaxis of the graph, and price is shown along the vertical axis.

Any variety of geometric shapes can be employed in the graphicrepresentation to assist Participants with respect to the building ofthe Bidstream, and to give Participants a visual representation of theirpositioning in the entire Bidstream building process; for additionalexamples, see FIGS. 3 and 4. In the case of FIG. 3, there is a steeperdiscount for providing early bidding information, but also a higherprobability of being one of the earlier reservations subject tocancellation if the system goes into oversubscription mode. In FIG. 4,there are an equal number of Reservation Rights BidBlocks at each givenprice point, so Participants are more concerned with what price levelthey have successfully reserved rather than how many BidBlocks are ontheir level. See Rewards for Information Production below.

The System's visual feedback provides Participants a new level ofinteractivity and control over their own strategy. Participants canplace multiple requests at different positions in the Bidstream, basedon their desire to achieve an overall price and volume allotmentposition at the time of the eventual offer or sale of securities, orassets, or units of goods/services when they become effective and/oravailable for sale. Likewise, tables can be used to display feedback tothe user about the percent of BidBlocks reserved, the pricing momentumof the placement of reservations, and/or other Bidstream metrics.

A potential investor and/or buyer (Participant) can become involved inbuilding a Bidstream, and obtaining an allocation in an anticipatedoffering and/or sale, as follows: First, in a U.S. jurisdiction-specificsecurities-based example, a Participant must contact their broker or theunderwriter, to establish suitability for their participation in theanticipated offering. For security purposes, the broker sends theaccepted Participant a log-on name and password, and sends them inconjunction with account limits to the Operator of the system. TheParticipant is then free to log on (i.e., over a data network such asthe Internet) to the pertinent system hosting site to download theregistration statement, preliminary prospectus, and any relatedmaterials, e.g., electronic roadshows.

When ready, Participants can simply fill out a blank electronic formprovided at the hosting site indicating their requests for the number ofshares desired, and at what prices; or can use a provided ReservationRight request calculator. Assume that a sample Participant, Joe, has upto $75,000 that he is willing to commit to investing in X Corp.'santicipated IPO. He would log on to a suitable Internet website with thepassword provided by his broker and be authorized to gain access andparticipate. After viewing the current Bidstream online, Joe can launchthe website's Reservation Right request calculator. In a U.S.jurisdiction-specific securities-based embodiment, Joe must firstacknowledge that he understands that his request is a non-bindingindication-of-interest, and then accept any statutory disclaimers thatReservation Rights requests do not constitute an offer or offer forsale.

Joe can chose to spread his requests over a given price range, with theunderstanding that his lowest price requests might be easily rescinded(cancelled) if the Bidstream is oversubscribed. This multiple-requestpositioning strategy allows Joe a minor degree of protection in gettingwhat he wants, but also frees Joe from monitoring the Demand Displaycontinually. Continuing our example, Joe enters the $75,000 and places arequest for 3,000 shares @$11.80/share. The request calculator (a simplearithmetic web service module) computes the request, shows Joeinteractively how much of the $75,000 he has left to work with, and askswhether he wants to make a second request. Accepting his first request,Joe places a second request for 2,000 shares @ $11.95/share, looks atthe balance, and based on a quick calculation he places most of theremainder for 1,200 shares @ $12.10/share. When Joe gets where he wantsto be positioned, he accepts his initial allocation requests and theyare submitted to the Bidstream. Joe can choose to use the ReservationRights request calculator to go back and forth between his requests andrefine his Reservation Rights request placement strategy for variousunit quantities at various price points, or in combinations of variousquantities and various price points. FIG. 5 shows Joe's currentReservation Rights request calculator screen, and FIG. 6 shows what Joewould now see in the Demand Display.

As the Bidstream continues to build with subsequent reservations fromother Participants, a picture emerges of the demand behavior andstrategic request positioning by those Participants requestingallocation BidBlocks that have been accepted and registered by thesystem. This informational transparency mitigates (or even eliminates)the potential for abuse due to the asymmetry of information availableoutside official disclosure documents, such as prospectuses or legal (aswell as illegal) selective disclosures. FIG. 7 shows Joe's requests,along with those of other Participants highlighted in this embodiment.

The aggregated requests for Reservation Rights build a Bidstream andrepresent the true market demand for either a new issuance, orsecuritization of the contracting for an asset or group of assets, orthe sales of units of goods/services. This transparent, competitive, anditerative process of the discovery of demand maximizes the proceeds tothe Issuer Group/Seller. Likewise, in the case of a debt offering, theprocess minimizes the effective yield the Issuer must pay to achieve itsoffering objectives.

Oversubscription

The system might hit a level of oversubscription, whereby all unitsavailable for the upcoming anticipated equity or debt offering, or unitsrelated to the securitization of an asset or group of assets, or unitsof goods/services for sale, are reserved (FIG. 8). The Bidstreamcontinues to move in search of the optimized price reflected by truedemand. In this geometric Bidstream build example, new ReservationRights units can be added at the next pricing point, and an equal numberof Reservation Rights units can be rescinded and/or cancelled from theParticipants' lowest price point positions in the Bidstream (FIGS. 9 and10). In cases where it is desirable or required to keep the totalproceeds from an offering or sale constant, a greater number of units atthe lowest price point can be rescinded and/or cancelled for each newunit accepted into the Bidstream at a higher price point.

In FIG. 10, additional oversubscription Reservation Rights requests areshown accepted @ $12.22/share by the system, and it continues to cancelReservation Rights requests @ $11.80 until the entire initial allotment@ $11.80/share is cancelled. Note that Joe has now lost his ReservationRight request BidBlocks @ $11.80/share, but still has two remainingallotment positions with two different unit quantities at two differentprice points. If the system notifies Joe of his lost Reservation Rightrequest, he might also be reminded that he still has two valid requests(2,000 shares @ $11.95 and 1,200 shares @ $12.10). He might also beasked by the system whether he wishes to replace his lost allotmentposition with another request, and given the current calculation of howmany shares that would reserve him at the current condition of theBidstream. In practice, system Implementers can choose to rescind and/orcancel lowest price point units in the reverse order in which they wereaccepted at a given price point, in order to reward the informationprovided by Participants who committed earlier at that price point.

To maintain the Bidstream's distribution or shape in a geometricBidstream build, the System can reset itself and make adjustments to theavailable number of allotted BidBlocks at each price. Simply put, someof the Reservation Rights request BidBlocks at the end of a row can bebumped up or down a row to maintain the allotment limit at each newprice consistent with the previous geometric shape. Optionally, anyParticipant whose Reservation Right was re-priced to maintain thegeometric distribution of the Bidstream can be notified of their newposition in the Bidstream. Depending on the geometric shape employed bythe Implementer, it is likely that such price adjustments would be nomore than 1% to 3% and the system pricing model rules and variance wouldtypically be disclosed to the Participants in advance. In effect, thesystem thereby changes upward or downward some of the bids unilaterally,but by prior authorization. In this example, the new estimated offeringprice is now $12.02/share.

FIG. 11 shows where new oversubscription Reservation Right requests areaccepted and reserved @ $12.24/share, additional Reservation Rightrequests @ $11.82/share are cancelled, and the holder of the lostReservation Rights is notified. The process continues with the systemresetting itself every time new Reservation Rights requests at the newhighest price replace the complete allotment at a given lowest price.

For the Issuer Group and/or Seller, this movement of the Bidstreamoptimizes price discovery, maximizing the final proceeds, until thedemand is exhausted. Each potential investor and/or buyer is allowed allthe units he wants, up to a given a price volume allotment limit aschosen by the Issuer Group/Seller using the geometric continuousBidstream embodiment. The Demand Display gives Participants full andtransparent access to the whole offering process, and an interactiveanalysis of emerging demand behavior.

When the Bidstream building is closed in preparation for the offeringgoing effective (i.e., the actual sales of the securities) or,similarly, other types of units of goods/services are ready for abinding sale, the pre-market demand has self-organized and the entiremarket has accurately built the book itself. The units are thenallocated among the Participants according to quantities specified bythe still accepted and registered Reservation Rights requests. Theselling price for each allocation can be based on the price point of agiven request or calculated by a formula. The new issuance offeringprice for an IPO is typically the arithmetic mean price of all requests,but can be calculated by any suitable function which is typicallydisclosed in the prospectus (such as the weighted average, the median,etc.). In this example, the mean and the median are the same pricebecause of the Bidstream geometric shape chosen by the Issuer Group.

In this example of a securities-based offering, the system notifies allParticipants still remaining in the Bidstream of their position in theBidstream (e.g., by e-mail), and the broker proceeds to fill requestsfor allocations in the offering with actual formal offers to sell. Incases where binding bidding is allowed, upon closing the Bidstream, theSeller would confirm sales orders and proceed to fill them.

The system inherently allows for Participant-determined pricediscrimination. In the U.S., the SEC (Securities Exchange Commission)could allow variable final pricing for the actual sales by a No-actionLetter determination, enabling each Participant to pay what herequested, rather than the single system-calculated offering price. Withvariable pricing already available for debt and for equities in certainlegal and regulatory jurisdictions, this promotes a natural trend towarda more competitive pre-market. In most non-securities based applicationsof the system, price discrimination also would reward earlier successfulbidders with greater discounts from the price paid by subsequentsuccessful bidders. This feature would encourage Participants tointeract with the system to gain maximum personal advantage for theirproduction of information, by extension causing them to make theirrequests early and often. For additional embodiments that rewardinformation production, see below.

The next pricing point can be determined based on the embodiment. In thecase of a continuous step-function embodiment, the next pricing point isat, or higher than, the last price reserved (or lowest yield, in thecase of debt). In other embodiments, the next pricing point might beanything over the mean price or lowest yield of all reservations; and inthe “free-bid” embodiment (see below), a mean or weighted average (orsimilar quantitative measurement) of all of the distributed requestscould be used as the basis for a floor on subsequent requests forReservation Rights.

These are just some of the next pricing-point options available to theIssuer Group/Seller through the system. The actual choice of the finalpricing method to be implemented and enforced through system rules wouldnormally be assigned to the Operators of the system by the IssuerGroup/Seller. These conditions would also typically be disclosed inregistration materials, and/or offering documents and/or announcements(e.g., registration statements, red herrings, preliminary prospectuses,official statements, indenture agreements, etc.), or sales materials inthe case of non-securities applications of the method.

Free-Bid Bidstream

The disclosure above describes one embodiment—building a Bidstream in afixed geometric figure method, where an initial-state Bidstream isgraphically presented as a series of available allocation BidBlocks witha limited quantity of reservation BidBlocks at each price point. TheBidstream embodiment is filled with Reservation Rights requests until itreaches an oversubscription mode. At this point, the initial-stateBidstream is reset to accommodate new Reservation Rights requests athigher prices or lower yields at or above a set point (e.g., a medianprice/yield, a mean price/yield, a weighted average price/yield, thelast price/yield which triggered oversubscription mode, etc.). These newrequests at a higher price point in the Bidstream can cancel outprevious requests at the lowest price point in the Bidstream, and thoselower Reservation Rights positions can be removed.

However, the Bidstream need not be built in a sequential fashion, oreven by limiting the available quantity of units allotment at a givenprice/yield point. As previously noted, in some legal and regulatoryjurisdictions (e.g., France), paying what you bid in a final equityoffering is allowed and even encouraged. This practice is in contrast tothe settlement of one price for all securities at the time of offering,the current practice in the United States for new issuances of equities.

Regardless of applicable jurisdictions, the Issuer Group/Seller canchoose to implement the system in a free-bid embodiment. In a free-bidembodiment, Participants and/or their agents can place one or moreReservation Rights requests in any volume and at any price/yield level.As in other embodiments of the system, these Reservation Rights requestscan be displayed in real-time.

The free-bid embodiment is potentially attractive to the IssuerGroup/Seller because Bidstream formation behaviors might be exhibitedearlier in the process, allowing more time to adjust their strategy andincreasing competition. This approach can provide the Participants'agents (including investment professionals [e.g., members of theunderwriter syndicate and broker-dealer networks] or other buyerrepresentatives) with more time to advise their clients toward bestachieving the client's overall price/yield and allocation wishes,including hybrid mixtures of price/yield and volume requests.Consequently, the probability is raised for all Participants in theeventual offering, or asset sale/underwriting, or sale of units ofgoods/services to arrive at the most equitable and satisfactory positionin the remaining Reservation Rights that survive the competitive,iterative process.

Another example shows such embodiments. For instance, in the free-bidexample shown in FIG. 12, the Participants begin with a series ofrequests in the $11.50-$12.00/share range. Some Participants can eventry to low-bid the system by placing some requests down in the$8.00/share range. A summary table (upper left in FIG. 12) of Bidstreamdistribution statistics tracks the building of the Bidstream inreal-time to assist a Participant's visual perception in analyzingBidstream behavior.

By analyzing the previous graphic distribution of emerging demand andrelying on real-time Bidstream summary statistics, new Participantsmight place a range of Reservation Rights requests at a slightly higherrange (FIG. 13). Note that the Bidstream summary statistics tablecontinues to track the emerging demand behavior. This forms the basisfor an information cascade, where the actions of early Participants aremade available to, and might thereby influence and alter the behaviorof, subsequent Participants. This shows the mitigation of anypre-existing asymmetry of information in action. Since all Bidstreambehavior is transparent to all Participants, Reservation Right requestsreflect any non-public or hidden information, and the pre-market as awhole can choose to take this into account.

FIG. 14 shows that, as more Reservation Rights requests are received,pricing momentum takes hold as the free-bid Bidstream begins to fill tothe full subscription range. The initial distribution becomes morevisible as the pre-market self-organizes. The tracking statistics show anarrowing between the mean and weighted average prices, indicating thatinitial demand is solidifying in the area of about $12.50/share.

In FIG. 15, the free-bid Bidstream eventually reaches the fullsubscription point. Since there is no fixed, geometric distribution toreset, the underwriter must choose a method for setting a floor for newoversubscription Reservation Rights requests. In this case, to move theBidstream forward in search of the true demand, the Issuer Group choosesthe weighted average over the mean. As in any geometric Bidstream, whilenew oversubscription Reservation Rights requests are accepted andreserved above the threshold set by the Issuer Group, the lowest pricedReservation Rights requests are cancelled and the holders of thoserights are notified. In this case, all Participants requesting in the$8.00/share price point range are canceled, as well as those on up to$11.70/share (FIG. 16). The Bidstream resets continuously as additionalReservation Rights requests are made, moving upward and eventuallydiscovering the accurate and true reflection of demand.

As in other embodiments, additional features can be implemented in thefree-bid embodiments to conform with applicable legal, regulatory, andcontractual requirements, and at the discretion of the Issuer Group,including (but not limited to): (1) e-mail notification of the status ofthe Participant's Reservation Rights that are currently valid; (2)e-mail notification of the cancellation of any Reservation Rightrequests; (3) statistical and graphical feedback of the current statusof the Bidstream building process; and (4) disclosure of any set-asidearrangements and their current status (see Set-asides below).

Stratified Bidstream

There are similar problems with current approaches to debt securityofferings. The system advantages apply to equity offerings, as well asdebt (bonds, notes, commercial paper, etc.) offerings. This is truewhether the bond (i.e., debt instrument) is corporate, sovereign,sub-sovereign, public, or municipal in its origination.

Unlike equity IPOs in the U.S., there is no regulation requiringoffering the anticipated debt securities at only one price (or yield, inthis case). Thus, one can use a stratified Bidstream embodiment with aset number of yields (i.e., coupons) available. Since the systemautomates much of the offering process, little additional effort isneeded to offer a limited number of yields, and thus only a few sets ofassociated Indenture Agreements or Official Statements (or similar debtoffering agreement). Alternatively, the system can offer discriminatorypricing related to one Indenture Agreement of Official Statement. Forease of comparison, the price equivalent of yield (i.e.,discount/premium from par) value can be used and displayed on the DemandDisplay and the Participant could toggle back and forth between the twoalternate views of debt pricing.

Since Reservation Rights requests made earlier might end up with higheryields (hence a lower price or greater discount), Participants areencouraged to indicate their interest earlier. This approach both buildsthe Bidstream and discovers demand for lower yields for the benefit ofthe bond issuer. FIG. 17 illustrates one such embodiment, where theIssuer Group might issue and register three series of bonds, coupons,and bond documentation sets (Indenture Agreement, Official Statement,etc.), as opposed to hundreds or thousands of documents that couldconceivably be required under different, continuous geometric and/orgeometric build embodiments. Alternatively, the Issuer Group can chooseto issue one series of bonds, coupons, and bond documentation, andconduct the actual sales of the bonds at different discounts/premiumsthat reflect successful positioning of the Participants in theBidstream. The stratification of a limited number of pricing and/oryield points would also simplify any secondary market trading,potentially homogenizing the after-market.

As with a continuous set of BidBlocks for an equity offering, a debtoffering is made up of a limited number of BidBlocks allotted atspecific yield basis points. But in this case, the Participant will endup paying what he bids, rather than a calculated mean or median of allbids. As a result, the Participant would have an additional advantage invariable-priced debt offerings when acquiring and retaining the earlyReservation Rights request BidBlocks.

Like the price range in an equity Bidstream, an initial yield spread isset by the Issuer Group. In the example of a high-yield corporate bondoffering (FIG. 17), the Bidstream is stratified to reflect the terms ofa set number (in this case, three) of bonds, coupons, and bonddocumentation, or to reflect three different pricing pointdiscounts/premiums from par for one bond, coupon, and bond agreement. Asin the equity Bidstream examples, Participants access the system, reviewthe current Bidstream offerings that meet their portfolio objectives,and make their requests.

As with continuous Bidstreams, Participants can build stratifiedBidstreams at the price of the highest yield, or spread their requestsover a portfolio of yield Reservation Right requests (FIG. 18). And asthe example high-yield bond offering Bidstream approaches fullsubscription, the System prepares to reset (FIG. 19). As the lastinitial Reservation Right request is accepted and reserved, fullsubscription is reached, the Demand Display resets, and more ReservationRights BidBlocks are made available at an even lower yield of 8565% as abuffer (FIG. 20). As new lower yield requests are accepted andregistered, an equivalent number of Reservation Rights are canceled atthe highest yield, and notification is sent to the holder of the lostReservation Right request. The stratified Bidstream for this example ofa high-yield bond continues to build, and will continue discovering thelowest yield for the bond issuer, until demand for the issue isexhausted and/or the Bidstream is closed.

Similar to the display of multiple Bidstreams for equities, new debtissuances and asset embodiments can be enhanced by using multipledisplays and/or split screens to display the Bidstream building ofmultiple maturities (i.e., serial bonds and/or term bonds with multiplematurities of the same debt issue) or multiple asset sales, and/or tocompare the Bidstream building of multiple debt issuers and/or assetsellers of the same (or different) credit ratings and/or presumedquality. Like geometric continuous Bidstreams, stratified Bidstreams canbe shaped with fewer higher yield BidBlocks to encourage earlierinformation production (FIG. 21).

Dual Bidstreams and Set Asides

In other embodiments having dual Bidstreams, a block of the securitiesand/or assets, or units of goods/services that might be excluded fromthe total amount of the securities and/or assets, or units ofgoods/services offered to the general Participants (herein called apublic pool block), but which might eventually be offered. These can bedisclosed (or not), and displayed (or not), based on the strategy chosenby the Issuer Group, and on the disclosure requirements of theappropriate legal, regulatory, and contractual jurisdictions. Oneexample is the so-called friends and family securities blocks set asidein equities underwriting, something of a tradition in IPO offerings inthe United States. Another example of this set-aside practice can beBidBlocks set aside for the underwriter syndicate (e.g., through anoverallotment; or in investment parlance, Green Shoe option), and/or anyinstitutional investor BidBlocks set aside within confines of theapplicable legal and regulatory conventions. Alternative scenarios forusing a dual Bidstream embodiment can include offering two classes ofstock, or even a hybrid offering of equity and debt, but are not solimited.

Based on the legal, regulatory, and contractual requirements of theapplicable jurisdictions, this set-aside can be disclosed in theprospectus. Based on the strategy of the Issuer Group, the set-asideBidBlocks can also be displayed on the same Demand Display screen as thedisplay of the current Bidstream for the public pool BidBlocks (FIG.22), or on a different screen or display to inform Participants of totalcommitments to the offering.

Using a dual Bidstream embodiment, the pricing of such set-aside blockscan be at a fixed price and quantity of units, or at a float based on aspread and/or discount from the projected offering price (or othersimilar quantitative measures or metrics). If the set-aside blockfloats, the system can make adjustments in at least three ways,including but not limited to: (1) the projected offering price toset-aside reservation holders can float and be calculated upon apredetermined, fixed number of reservations; (2) as in the fixedmonetary requests made by individual Participants and/or their agents,the number of reservations allowed for set-aside reservation holders canbe made on a fixed monetary value, and the number of reservations can beadjusted by an embodiment based on the equivalent value of any spreadand/or discount off the float of the projected offering price/yield; and(3) a hybrid of the two methods above can be implemented where someset-aside reservation holders have a fixed number of reservations with afloating price/yield, and when other set-aside reservation holders havea fixed monetary reservation where the number of Reservation Rights areadjusted, based on the equivalent value of any discount off the float ofthe projected offering price/yield.

If the set-aside block floats with the Bidstream, the IssuerGroup/Seller must determine whether this set-aside is for a fixed amountof units or for a fixed monetary value. Like any other Bidstream, whenthe Bidstream reaches full subscription, the system will continue toreset to a higher price range as long as there is ongoing demand—in duecourse, discovering the true price.

Set-aside reservation holders can, likewise, be notified of any changesto their own allocation position or to the status of the generalReservation Rights Demand Display, and to any associated statisticalmeasures. This might encourage set-aside Participants to participate inthe general Reservation Right public pool (in addition to any rightsthey might previously have as the result of set-aside arrangements),particularly if there limitation of a fixed number of set-asidereservations or there are reductions in the number of Reservation Rightsin the set-aside BidBlocks because of the equivalent value of anydiscount off the changing float of the projected offering price.

In any case, where there is a reduction in the number of ReservationRights in the set-aside BidBlock, these freed-up units might or mightnot be used to supplement the number of Reservation Rights unitsavailable to the public pool BidBlock section of the Bidstream. They canbe added at a statistical point (e.g., the mean, median, some weightedmeasurement, etc.), or at the highest current price/lowest yield, or putinto the overallotment pool and/or some other insertion point chosen bythe Issuer Group. See FIG. 23 for one such example.

Leveling the Playing Field

There exists the probability that different individuals andorganizations will work with varying qualitative degrees of pre-offeringor pre-sales information gleaned from both public and private researchand from other sources of information. One advantage of the presentsystem is that it displays the real-time building of the Bidstream as areflection of the demand generated by this asymmetric distribution ofinformation. In effect, by combining and homogenizing the resultingreflection of such asymmetric information (i.e., the display of allReservation Rights), the system diminishes the relative advantages ofthose Participants with access to non-public information over thosewithout such access who are at a relative disadvantage. The systemaccomplishes this by equitably merging or mixing the results (i.e.,demand) of information of varying quality from different sources, thusgreatly reducing, if not entirely eliminating, some of the relativeadvantages and disadvantages of Participants with and without access toapparently superior information (whether or not that information wasobtained ethically and legally). However, it is recognized that thoseParticipants holding superior information might retain some advantage ofmaking earlier Reservation Rights requests, retaining a higherprobability of achieving their desired price and allotment positions.

The following example demonstrates this benefit of reducing asymmetry.In one embodiment, an Issuer Group/Seller and/or Operator provides tothe Participant or his agent a graphic representation of a fixed numberof Reservation Rights for the upcoming units to be offered over a datanetwork such as the Internet. The fixed number of Reservation Rightsrange, at a per Reservation Right price, from a lowest price pointreservation BidBlock to a highest price point reservation BidBlock.

This Bidstream can be represented graphically by an easily understoodgeometric shape reflective of the underlying price discovery behavior(i.e., the emerging pre-market). This is of particular importance andvalue to: the less sophisticated potential investor/buyer who might bedisadvantaged by not having the day-to-day experience of dealing withprofessional trading systems based purely on numeric-data displays oncomputer screens (as compared to the more experienced investor/buyer);the potential investor/buyer might also be at a disadvantage due to ofthe asymmetry of information resulting from selective disclosure; and/orthe potential investor/buyer who might find the cost of informationproduction prohibitive outside of the registration materials,prospectuses, or sales materials. The Participant requests at least oneof the fixed numbers of Reservation Rights BidBlocks by submitting arequest for that Reservation Right at a Reservation Right request pricepoint. If the request meets the suitability criteria (i.e.,investor/buyer suitability profile, credit limits, etc.) of the IssuerGroup/Seller and any monetary and/or volume limits set by the IssuerGroup/Seller, the request is accepted and registered by the system'sBidstream database module. Likewise, if the request fails to meet any ofthe Issuer Group/Seller criteria, the system can interact with theParticipant to align the request in line with the system's currentcriteria. For example, if a Participant makes a unit quantity requestfor more units at a given price point than are remaining in theBidstream at that price point, the Participant might be offered whatunits are still available at that price point, and would be asked ifthey wish to continue making additional requests. Similarly, if aParticipant makes a request that exceeds his credit limit set by theIssuer Group/Seller, the system can interact with the Participant toalign the request with criteria acceptable to the Issuer Group/Seller.

As successive requests are accepted and registered, all system usersincluding the Issuer Group/Seller, the Operator, and the Participantscan monitor the graphic representation of all accepted and registeredrequests. The System can use different colors to represent accepted andregistered requests and/or empty request BidBlocks (i.e., reservationBidBlocks still available in the Bidstream). Subsequent requests forReservation Rights would be accepted and registered in the Bidstreamdatabase module only when the Reservation Right request price point isthe same as or higher than the Reservation Right price of the lowestprice point Reservation Right allocation BidBlock remaining available.Likewise, quantity requests at that lowest price point are limited tothe quantity of BidBlock units remaining available within the BidBlockunit quantity limits set by the Issuer Group/Seller in a givenembodiment chosen by the Issuer Group/Seller.

In this embodiment, the system would give Participants visual feedbackof their positions in the Bidstream, based upon the unit quantity andprice of the Reservation Rights successfully accepted and registered andthose units still remaining available in the Bidstream. This monitoringfunction can be accomplished by requiring Participants, or agentsmonitoring their clients' positions in the Bidstream, to log on forauthorized access to such feedback or, alternatively, this function canbe implemented through an Internet cookie system.

In this embodiment, tables, charts, or graphs can augment a graphicand/or geometric representation of the Bidstream; and/or as theBidstream is formed, the system can provide overlays depictingstatistical reflections of market demand (e.g., current mean, median,and weighted averages, volume over time, etc.). In both regular andoversubscription modes, the same tables, charts, graphs, and overlaysmight also display the velocity of demand as reflected by changes inprice-setting momentum, thereby further assisting individuals who mightbe relatively disadvantaged due to an asymmetry of information about theemerging behavior of a Bidstream.

When the number of requests for Reservation Rights is greater than thefixed number of Rights set by the Issuer Group/Seller, one or morelowest price point Reservation Rights are removed from the fixed numberof Reservation Rights in order to maintain a fixed number of ReservationRights or a desired amount of proceeds from the offering and/or sale,thus leaving a remaining number of successfully accepted and registeredReservation Rights. As previously mentioned, system Implementers canchoose to rescind and/or cancel lowest price point units in the reverseorder in which they were accepted at a given price point, in order toreward the information provided by Participants who committed earlier atthat price point. In this embodiment, overallocation rights can be usedas a leveling mechanism and/or buffer for a number of purposes, namely;to extend the fixed number of Reservation Rights BidBlocks as needed(e.g., as Reservation Rights are added and/or removed during pricingresets to maintain geometric consistency); to interact with changingset-aside pools, and/or as a reward for relevant information production.See Rewards for Information Production below.

In this embodiment, the Participant losing his Reservation Right can benotified and can choose to re-request. Then, at a predetermined closingdate and time, the remaining number of Reservation Rights, which havebeen requested by the Participant and remain successfully accepted andregistered in the Bidstream, are subsequently offered to that potentialinvestor/buyer by the Issuer Group/Seller at that Reservation Rightrequest price, according to the securities or contractual rules andregulations of the applicable legal jurisdiction.

In some embodiments, the actual sale of securities, or assets, or unitsof goods/services might be offered to the Participant based on a formularelated to the final pricing points of all Reservation Rights.Previously mentioned examples include the arithmetic pricing mean, thearithmetic pricing median, a weighted average price, etc., but are notso limited. However, the reduction of the asymmetry of informationplaces the Participant at less of a relative disadvantage than he wouldbe under the existing processes for book building or building a salesorder book.

Rewards for Information Production

Embodiments accommodate both pooling and separating signalingtheoretical models (assuming that a given implementation embodiment iscompliant with the applicable regulatory, contractual, judicial, andlegislative requirements). In some sense, all signaling models have thesame underlying structure. Under certain conditions well-informedplayers can improve their market outcome by “signaling” their privateinformation to those who know less. A pooling equilibrium is anequilibrium in which all types of sender send the same message. Aseparating equilibrium is an equilibrium in which all types of sendersend different messages. In general, a system is said to be in a stateof equilibrium if all influences on the system are cancelled by theeffects of others. In some embodiments, all Reservation Requests areblind—i.e., the source of the signal of value is seen by all, but is notidentified as to its source (called here “pooling” signaling). In otherembodiments, the source of the Reservation Request is identified or canbe optionally identified if it exceeds a specific threshold number ofReservation Requests or their aggregate quantity and/or equivalentmonetary value—resulting in a separating signaling. For a separatingequilibrium to exist there must be signaling costs that differ acrossgroups. These two signaling conditions form what is called in economicsthe single-crossing property. Arguably, in a new issuance, differentgroups incur different signaling costs.

In the case of a separating signaling equilibrium, certain embodimentscontain a mechanism for reaping the benefit of costly signaling. Thisdisclosure also addresses the problem of enticing and rewarding qualitysignaling of interest earlier in time in the Bidstream building process,as discussed above.

Underwriter syndicates and their broker-dealer networks enjoy theadditional advantage of having a better overview of deal flow, thusenabling them to advise their clients about new issuances in which toparticipate, and about what Reservation Right strategy to employ toachieve the best overall portfolio results. For example, underwritersand institutional investors might know more than an issuer about theprospects for the company's competitors, or about the economy as awhole. Also, because they are exposed to the flow of deals (e.g., IPOs,debt floatations, etc.) on a continuous basis, underwriters andinstitutional investors are likely to know more about the strength ofthe deal market pipeline in general, or about deals by similar companiesalready in the pipeline. And finally, even a less well-informed investorknows something the issuer doesn't know: i.e., the investor's ownparticular demand for the price yield/volume of the new issuance.

Why would potential investors be willing to reveal importantinformation, especially when it is positive? Information production andsharing occurs because of the transparency incorporated into the system,where withholding positive information might also result in little or noallocation and/or a less advantageous pricing in the actual sale of thesecurity, asset, or units of goods/services.

Information Cascades

As previously mentioned, price discovery raises a problem in the priorart of book building and building a sales order book processes for theIssuer Group/Seller: namely, that potential investors and/or buyersmight have incentives to withhold information regarding unit demand atgiven price points if they suspect that the information will be used totheir disadvantage. The problem is likely to be particularly acute incases where: (1) the information is costly to acquire; and/or (2) theinformation, if revealed, would lead to a revision of the eventual salesprice.

This conundrum leads to embodiments where early providers of information(i.e., Reservation Rights requests) are rewarded for their signaling ofany imputed valuation analysis. The system can reward earlyrequestors—Participants who provide earlier signaling and production ofinformation concerning both pricing and allocation demand. For example,rewards might be accomplished using methods specific to a givenBidstream, including (but not limited to): (1) the geometric shape(e.g., where there are more unit allocations for Requests made earlier,that is, at the bottom of the Bidstream (i.e., a pyramid shape, etc.);and/or (2) a weighted formula, used as an alternative way to discountand/or increase the unit allocation to earlier Requests.

In addition, where legal, regulatory, and contractual jurisdictionsallow some form of discounting, and/or do not enforce one-price-for-allmethodologies, embodiments can be tailored to compensate qualitysignaling (e.g., earlier and larger block requests, disclosure of theidentity of sophisticated investors, etc.). This compensation or rewardmight be in the form of a discount, or some other fully disclosedreward. Quality signaling rewards might be fixed, or might float basedon a spread from some other measurement (e.g., final offering price,weighted averages, etc.). In the case of the U.S. example, this isalready possible in new debt issuances, where two or more indentureagreements might be created to encourage those requesting ReservationRights to signal their interest sooner in order, to get a higher yieldor the final sales price offered might vary as a discount/premium frompar.

Moreover, where legal, regulatory, and contractual jurisdictions allowallocation discretion, the system would embody the results ofinformation cascades—rewarding Participants providing earlier signalinginformation through earlier requests with greater allocations on somepredetermined basis. Information cascades would happen when potentialinvestors/buyers make sequentially timed decisions concerningindications of interest (i.e., later Participants might condition theirinterest based on the growth, volume, and pricing momentum of previousrequests for Reservation Rights), with demand either snowballing orremaining low over time. In manual book-building or building a salesorder book, information cascades are difficult to develop unless theIssuer Group/Seller divulges privileged information, because the IssuerGroup/Seller is usually obligated to keep such information secret or, atleast, not to release it selectively. In the present system, informationcascades would easily develop because all Participants can transparentlyview the accepted and registered Reservation Rights of all otherParticipants. Hence, the system is more likely to motivate additionalactions that would not otherwise occur without this inherenttransparency.

For instance, based on the amount of time remaining to closing of theBidstream formation, the earlier Participants could be offered a portionof the overallocation allotment or additional rights, on a slidingscale. This signaling reward might take many forms including but notlimited to: (1) additional Reservation Rights at the time of the newissuance and/or sale of units (e.g., a portion of the Green Shoe ininvestment parlance overallotment provision); (2) selective use ofoption units (for example, options to Participants who requestReservation Rights above a certain monetary or volume block size); (3)an additional right in the form of post-issuance options; and/or (4)selective post-issuance pricing support.

Furthermore, this incentive for the production of quality informationcan be coupled with, or decoupled from, eventual positions in theBidstream when the building processes close. To further elaborate,rewards for information production can be limited to the number of unitsof a given Participant that successfully remain in the Bidstream, orinformation production rewards might still be available even when theBidstream closes, and even if the Participant has no remainingsuccessful accepted and registered requests for Reservation Rights.Where such variations exist, this disclosure proposes that the rulesshould be kept relatively straightforward, should be disclosed and easyto understand, and should be included and updated in and through anyscheduled communications and/or updates of graphic and/or textualfeedback of a given Participant's position.

Status Notifications and Document Delivery

In one embodiment, those Participants losing a Reservation Right arenotified and the Participant (or their agent) can decide whether tore-request, and at what unit volume, given the visual and statisticalreflection of market demand and rate of change of demand as reflected bychanges in price/yield setting momentum.

The notification of Participants by e-mail need not be limited to caseswhere the requested Reservation Rights have been rescinded or cancelled.Operators of the system can offer the capability of Participant-definedperiodic updates (e.g., a graphic presentation snapshot of the Bidstreamand the Participant's positions of reservation relative to the entireBidstream, or a statistical report of significant metrics, and/or anoral report automated to leave relevant information on an electronic[e-mail, facsimile, SMS, wireless PDA] and/or voice channel [voice-mail,cell phone, etc.]), to be e-mailed or voice-mailed during the course ofbuilding the Bidstream. For instance, an Operator can offer, and aParticipant can choose to accept, updates on a time basis (e.g.,monthly, weekly, daily, hourly, or by minute).

Embodiments can also offer this reporting in a changing mode selected bythe Issuer Group, and/or by the Participants themselves, where the timeperiods differ. For example, in a one-month Bidstream build, theParticipant can choose weekly notification for the first two weeks,daily notification for the next ten days, hourly notification for thenext three and three quarter days, and minute-based updates in the last6 hours. These notifications can be available twenty-four hours a day,or set to a clock that is calibrated to the Participant's time zone andwork/sleep patterns.

The system's automated e-mail capabilities can also be used to meetlocal regulatory and/or contractual requirements. This feature providesthe means to: (1) qualify potential investors and/or buyers; (2)distribute electronic versions of registration statements, redherrings/preliminary prospectuses, Indenture Agreements, OfficialStatements, Sales Offers, Sales Contracts, etc.; (3) distribute anyrequired prospectus and/or sales offer amendments (such as pricingamendments); (4) distribute confirmation of receipt of updates andamendments, and (5) notify the underwriter syndicate and itsbroker-dealers (or similar sales representatives in non-securities basedapplications) of individual conditions that might require manualprocesses (e.g., such as mailing a pricing amendment, confirming aReservation Right, post-effective sales deliverables, etc), but are notso limited.

The system can also be used to deliver multi-media materials related tothe anticipated offerings, registration statements, red herrings andprospectus materials, shelf offering materials, other new issuancesecondary equity prospectuses, sovereign debt prospectuses, municipalbond red herrings and official statement materials, corporate bond redherrings, indenture statements, and other prospectus materials (for debtand/or convertible debt securities). The system can also provideoffering materials for the securitization of assets or groups of assets,and/or additional information allowed under applicable securities and/orcontractual laws and regulations. In the case of non-securities basedapplications, the system can provide multi-media materials and/orhyperlinks to those materials to provide additional information to thoseParticipants in support of a sales order process.

In some embodiments, various multi-media materials can be provided andfiled as part of the prospectus or as an appendix to the prospectus,including the script of any video as well as a fair and accuratenarrative description of the graphic or image material.

Likewise, an Issuer Group/Seller might choose to further educatepotential Participants by optionally showing them demonstrationsimulations of the rules in place for a given embodiment, before theyactually participate in the building of a given Bidstream. Thesesimulations can be also offered through the system as an optionalgeneral purpose investor/buyer-education module in a website, and/or asa specific simulation of the rules for a specific offering or sale,entirely segregated and associated only with the associated Bidstream towhich it applies. These simulations might also be useful to a potentialParticipant in building or in using automated and/or program tradingsoftware agents to act within a given set of rules associated with thebuilding of a particular Bidstream. See Automated Program Trading below.

System Overlays

Various distribution curves can also be employed as display overlays(i.e., additional graphic elements) that allow the Issuer Group/Seller,Operator, and/or Participant to choose differing viewpoints of theoverall Bidstream that might otherwise appear irregular or choppy,particularly in free-bid embodiments' Demand Displays. An example ofthis is displayed in FIG. 24, showing a Poisson distribution whichnormalizes the display of a variety of reservation requests in thefree-bid embodiment. Other display overlays include but not are limitedto:

-   -   1) historical overlay (for example, behavior of previous        offerings with similar characteristics [e.g., an IPO in the same        industry with earnings multiples factored in, previous pricing        momentum curves based on similar Bidstream behavior, etc.]);    -   2) weighted overlays (e.g., showing retail investor Bidstream        building behavior contrasted with institutional investor        Bidstream building behavior, or showing behavior based on unit        quantity request behavior, etc.);    -   3) large Reservation Rights quantity requests overlays (with        Participant identities, if available);    -   4) oversubscription overlays;    -   5) price spread overlays;    -   6) price movement momentum overlays; and    -   7) Participant specific overlays e.g., current status,        probability of remaining accepted [given current pricing        momentum metrics], etc.),    -   8) scenario overlays (e.g., “what if” scenario overlays), and    -   9) game theory based overlays (e.g., those using competing        and/or cooperating modeled outcomes, Nash equilibria, etc.).

Overlays can be: static in nature (e.g., a snapshot of the currentstatus of a Bidstream with a historical, weighted, or price spreadoverlay); iterative (e.g., with an overlay being refreshed and showingadditional delta information such as changes of pricing momentum);and/or with simulation based future projections (as in the case of “whatif” scenario tools, and/or game theory-based simulations with variousoutcomes having different probabilities associated with them). Thesystem can run iterative and/or simulation-based overlays in iterativeloops, with the results being reported as input from the Bidstreamchanges, thus changing the input data and/or criteria.

Just as colors can be used on the Bidstream display by members of theIssuer Group and/or Seller to assist in their offering/sales decisionmaking, the Participant can also be provided access to their ownbehavior overlays, with a pre-selected (or Participant-definable) colorpallet to assign colors to various Bidstream behavior characteristics(e.g. spreads, pricing momentum, large Reservation Rights block requestsif supplied with Participant identities, etc.).

In the case of new issuances of debt, bond, municipal bond, corporatebond, underwriting, portfolio, and/or other assets, additional usefuloverlays can be employed. These would include but are not be limited topast, present, and projected future: (1) U.S. Treasury yield-curves orother indexes (such as LIBOR); (2) spread from U.S. Treasuries or otherindices; (3) yield-to-maturity; (4) yield-to-call; (5) yield-to-worstcall; (6) commodity indices; (7) comparable asset portfolio pricing, andso on. These overlays can also be displayed in a time-series layout fornew issuances and/or asset revenue/earning stream contracts, which mighthave a series of maturities and/or a series of terms. Overlays mightalso include comparable overlays of historical, current, and/orprojected yield curves and/or spreads for similarly rated and/orsimilarly structured secondary market securities and/or assets.

Distribution curves can also be employed as safeguards to avoidstatistical pumping in a free-bid embodiment—which might be desired bysome of the beneficiaries of the result of the Bidstream building (forexample, unusually highly-priced requests by an affiliate of the IssuerGroup designed to skew the statistics higher than the bulk of therequests would otherwise indicate). One available distribution curvetechnique employs various distribution curves as a means of cutting offrequests that have a set variance or statistical outlier from theboundaries of a chosen statistical distribution, and/or even rejectingReservation Requests that are clearly outliers, thereby managing andmaintaining stability in the orderly building of the Bidstream.

Finally, distribution curves can also be employed, in combination withthe free-bid embodiments, in those legal, regulatory, or contractualjurisdictions that require the eventual offering and/or sales price tobe uniform for all eventually anticipated offers or sales. The differentdistribution curve types can be used to display current projected salesprice or projected price based on changing Bidstream criteria (e.g.,price momentum, percent oversubscription, etc.)

Other Features

In graphic display embodiments, the displays can be color-coded withdifferent colors used to signify different parts of the Bidstream (e.g.,one color for unreserved Reservation Rights, a different color for theParticipant's requested reserved positions, another color to indicateoversubscription mode, and so on. Furthermore, color overlays can beused by member of the Issuer Group/Seller to assign different and/orchanging behavior in the Bidstream, as a means of effecting changesrelated to their strategic and tactical offering plans. These issuesmight include but not be limited to: (1) decisions on the handling ofthe overallotment options; (2) increase or decrease in marketing and/orsales efforts; (3) decisions on managing underwriter, syndicate member,or sales representative roles (if any) in after-market pricing supportstrategies and tactics, and so on.

In cases where the Bidstream is not built in a step function, tables candisplay the distribution of the Bidstream and give important statisticalfeedback on the pricing and distribution of the reserved BidBlocks(e.g., the mean, the median, weighted averages, etc.). The System cannot only provide instantaneous feedback to the user, but can also givestatistical and graphic representation of historical volume and pricingduring the course of building and extending a specific Bidstream and/ormultiple Bidstreams (representing multiple new issuances) or differentaspects of a multi-part issuance (e.g., different maturities of a termseries bond offering).

In some embodiments, two-dimensional information (graphic or otherwise)can be presented in various ways optionally, even configurable by theParticipant, namely: vertically, horizontally, both viewssimultaneously, or both alternately. For instance, in a geometricgraphic representation of the Bidstream, the price for equity, and/ordebt, and or units of goods/services, and/or the yield for debt, can bedisplayed on one axis, and quantity on the other (either horizontally orvertically).

Furthermore, also contemplated is display of multi-dimensionalinformation to the Participant. For instance, unit quantity can bedisplayed on the x-axis, price/yield on the y-axis, and time on thez-axis, allowing the Participant to view the building behavior of aBidstream over time in three dimensions from any desired angle.Additional dimensions are not limited to time, and can include but arenot limited to a variety of such quantitative and qualitative past,present, and/or projected future measurements (e.g., credit risk,portfolio considerations, secondary market behavior, projected financialanalysis, and so on.

The identities of Participants requesting blocks of Reservation Rightscan be optionally revealed on the computer display via a point-and clickfunction, or in a separate tabular format. This can be done anonymously(e.g., showing only institution block investments with a different colorcoding), and/or explicitly (e.g., whereby specific references toinstitutional investors and/or to significant size requests areidentified by name.

Another example shows how variations in the system might facilitate aParticipant's desire to use a particular positioning strategy. This isdemonstrated by affording individual Participants and/or their agentsthe optional selective freedom to make requests either in a fixed numberof unit requests at a given price, or in terms of a fixed monetaryamount. When a Participant first makes one or more requests forReservation Rights, the system allows the Participant to request a fixednumber of Reservation Rights at a given price, or to request a monetaryamount, letting the system calculate the number of Reservation Rightscurrently available. The system might ask the Participant if it shouldplace those reservations in the lowest price BidBlocks available, oralternatively spread them over a price range with the support of amultiple-request Reservation Rights BidBlock calculator. Such acalculator can be configured to interactively allow Participants toplace multiple requests for Reservation Rights from aParticipant-selected monetary amount, and receive feedback about thedistribution of their requests and/or the balance of the requests atdifferent request levels FIG. 5). Likewise, if the request is for afixed monetary amount, then the System can adjust the number of requestsfor Reservation Rights according to the current status of the equivalentvalue (with respect to the changing and real-time adjustments),according to the formula chosen for arriving at the projected offeringprice.

The goal of maximizing the transparency of the Bidstream buildingprocess is to provide information feedback to all Participants in anon-discriminatory, real-time fashion. “Real-time” here is a relativeterm, and actually might be tuned or modified by those implementing thesystem. As used here, real-time refers to the time intervals (seconds,minutes) during which all requests are recalculated and set forre-display (i.e., the refresh process) from the Systems servers or froma similar information distribution point. Any delay from this refreshtime resulting from private and/or public (e.g., Internet) networktraffic and/or because of a Participant's network access speed, mightcreate slight variants, which are inherent and to some degree expectedin the electronic information distribution infrastructure. Nevertheless,the objective is to provide a truly level playing field with equitable,non-preferential, symmetrical, and near-simultaneous access for and toall interested Participants.

If relevant legal, regulatory, and/or contractual rules stipulateexactly equivalent delivery, particularly where program trading agentsreact faster than their human counterparts, then the system can bemetered to deliver to all Participants at a least common denominatortransmission speed acceptable to the appropriate regulators.

Implementers can choose to employ a database to ensure proper trackingof the regulatory requirements for both electronic and paper delivery,and to provide the reporting basis for any required actions by themembers of the Issuer Group and/or sales representative of a Seller. Thedatabase component of the system also provides implementation ofreturn-reply receipts via e-mail, as well as secure record keeping ofaccess, downloads, and printing as further evidence of compliance withrespect to the distribution of red herrings to broker-dealers, and thedelivery of prospectuses to potential investors, pricing amendments,term sheets, or sales materials and pricing information (in the case ofnon-securities based applications), and so on.

Database features of various embodiments, combined with the systemsautomated e-mail features, can be implemented for such purposes ofidentification and/or qualification including but not limited to thefollowing: (1) the suitability of investors/buyers; (2) qualifiedlog-in; (3) managing Reservation Rights request monetary and unit volumelimits; (4) delivery of required documents and/or notifications; (5)confirmation of deliveries of required documents and/or notifications;(6) compliance recording and tracking; and/or (7) delivery of any salesdocuments. These database features of various embodiments can alsoprovide the basis for selected—and/or auto-generation of exceptionreports. These reports are electronic lists of interactions with aSystem embodiment that could identify situations that might triggernon-compliance with securities laws and regulations, and/or contractualobligations, and/or identify the need for manual action. The reports canalso notify the appropriate party to initiate corrective action(automated or through backup manual processes) to facilitate proactivecompliance with applicable local securities laws and regulations and/orcontractual obligations.

Additionally, certain features can be combined in various ways withother features. For example, the notification option could be set tochange from periodic updating if certain Bidstream behavior patternparameters are exceeded (e.g., pricing momentum, price/yield presets,changes in market and/or economic conditions outside the specificBidstream, changes in the Participant's other portfolio metrics, etc.).Then, any desired information update could be produced withImplementer-, Operator-, and/or Participant-selected color-coding and/orother overlays, and program trading agents can be manually orautomatically activated to be able to respond to the changingconditions. This illustrative scenario is just one of many ways a systemImplementer and/or Operator can offer and add value to the Bidstreambuilding process, and by which a Participant can choose to combinedifferent features in the system to tailor interactions to theindividual Participant's needs and wishes.

Role of the Underwriter Syndicate

Under the present system, the underwriter/investment bank no longer needmanage the book building process—the market itself can accomplish thisequitably and fairly, mitigating the potential for abuse. The systemstill allows the underwriter syndicate and its associated broker-dealernetwork to add value through limited control of the design of theBidstream (including setting initial price point ranges and anyprice/unit volume limitations) and optional control of visual feedbackfeatures, handling of overlays, handling of set-asides, handling ofoverallotment Green Shoe options, and so on. Even so, underwriters stillhave an essential and valuable role to play in advising new issuancecandidates, gathering and organizing information about the issuingcompany for the prospectus, conducting due diligence, developingregistration materials, and educating the public and potential investorsabout the company through the roadshow and other approved activities.

Furthermore, underwriter syndicates and associated broker-dealernetworks would still play an essential role in the screening ofParticipants for suitability, both locally and globally, and in advisinginstitutional and retail investors on their investment and portfoliostrategy. And, perhaps most important, since most embodiments arefocused on building the book and/or in collecting indications orinterest, and do not include the actual offer or sale of the securitiesthemselves and/or the securitization of assets, the underwritersyndicate and its associated broker-dealer network are necessaryentities in offering, executing, and clearing any actual securitiestransactions and/or the securitization of assets, as well as providingany desired after-market support.

As more of the pricing and allocation abuse loopholes are closed, andunderwriters cannot replace lost commissions resulting from so-calledmoney left on the table with other gains from quid pro quo agreementsand tie-ins, they might focus on maximizing the information provided tothe public to insure that proceeds to the issuing company are maximized(thereby maximizing the underwriter's commissions)—finally honoringtheir true and represented fiduciary duty to both the issuer and totheir own stakeholders (e.g., financial firm partners, owners,stockholders, etc.).

The system does not impede or preclude the creation of an underwritingsyndicate prior to or during the waiting period (in the U.S. example,the period between the filing of the registration statement and itseffectiveness). Syndicate members (e.g., other investment banks, retailsecurities organizations, large wire houses, and locally-basedsecurities retailers) can still act as agents of the underwriter withrespect to educating their clients. This process can be accomplishedthrough distribution of red herrings and participation in any roadshows,and by serving as agents of both private individuals and institutions inarriving at and executing a strategy for placing Reservation Rightsrequests, and then monitoring their client's position in the Bidstream.Commissions on, or discounts off, the price of Reservation Rights canstill be earned through the efforts of the syndicate when there is aresulting sales transaction, and such discounts or commissions can bedisclosed in any final prospectus, pricing amendment, or term sheet aspart of the agreement reached between the issuer and the leadunderwriter.

In summary, the system is not necessarily meant to replace such actionsand activities of the issuer, underwriter syndicate, and broker-dealersas, for example: due diligence; preparation of registration statements;disclosure obligations; prospectus and notice delivery obligations;general selling or promotion efforts; and/or securities salesactivities. Embodiments are focused primarily on the fair and equitableoptimization of new issuance pricing (price discovery) and allocationand/or the efficient securitization of assets. Aspects of variousembodiments might also serve as the platform to automate and increasethe efficiency of activities that are still the statutory responsibilityof those respective parties.

Lastly, it should be noted that the underwriting industry is incurringan escalating exposure to criminal and civil penalties, and suchliabilities might, in fact, exceed the total of any prospectiveunderwriting fees and commissions. As an important side benefit to theunderwriting industry, the system also reduces the opportunity forabuses in pricing and allocation, and thereby significantly mitigatesthe potential liabilities of the parties involved in the offer, sale,and distribution of new issuances.

Automated Program Trading

The present system can also provide computer-readable standardizedversions of the Bidstream statistics through standardized system outputs(e.g., application programming interfaces), which allows Implementers,Operators, and licensed Participants in the system to build computerapplication software programs for program trading-like Bidstreammonitoring, and for automated Reservation Request computer programs thatact upon information received from the system.

Also contemplated is an embodiment by which program like trading allowsSystem Participants to set parameters to initiate the automation ofrequests for the placement of Reservation Rights (and alternatives)—inessence, layering on the System methodologies. An example is the use ofa computer-enabled algorithm (program) that sets desired price andvolume commitments, and then adjusts the execution of Reservation Rightrequests based on those parameters, and/or on statistical feedback fromthe System e.g., change in price velocity over time.

Simulations and Video Games/Entertainment Embodiments

Some embodiments are directed to simulations and uses of the system forthe purposes of such applications as: participant education, generalbusiness education, training, and video game and/or other entertainmentmodes. For example, Operators can offer a variety of simulations so thatpotential Participants can familiarize themselves with a givenimplementation, run simulations, and investigate various “what-if”scenarios.

As further illustration, business schools and other educational venuescan use simulations with a variety of pre-loaded system behaviors and/orconditions designed to be interactive with the students. The financialservices community can use embodiment variations to train theirinvestment banking, research analyst, and trading professionals.

Likewise, the system can be embodied in simulations for theentertainment and possible education of the end-user (e.g., as asubstantive video game). The game approach is particularly interestingand attractive where interactions with the entertainment system triggera variety of simulations that might be pre-configured for single-userinteraction or in group play. In the latter, the game would operatethrough simulations that react to the participation of multiple usersand are based on formulas that can be randomly cycled, or based on a setof conditions that are disclosed (or not) to all of the players.

Non-Securities Offers/Sales

The system also allows potential sellers and buyers to participate inconditional or binding offers to sell, offers to buy, and/or in acollection of indications of interest of units of goods/services, all ina transparent, competitive, and equitable manner. Thus, the system canbe used in many other situations where there might be a large number ofunits to be supplied, or where more competitive pricing is desirable, orwhere more transparent pricing is desirable, or where more iterativeprice discovery is desirable (i.e., where fair and efficient pricediscovery might be problematic), and/or in circumstances where fair andefficient allocation of the units to numerous potential buyers might beproblematic. The system can also be used where supply is not fixed, butmight be varied by the Issuer Group/Seller in response to the emergingdemand and discovery of price. For instance, if the system discovers amore favorable price, the Issuer Group/Seller might choose to provideand/or produce more units of the item and dynamically increase theReservation Rights allotment BidBlocks limits in response, therebyachieving a dynamic Bidstream. Further, when used for service or laborunit pricing and allotment, the system can add additional units whilesimultaneously compensating for the price of additional overtime chargesand/or premiums.

There is potential for unique and novel compensation, structuresresulting from the building of a Bidstream. For example, some or all ofthe compensation to the system licensor and/or Operator would be basedon the amount of change in the pricing range due to the oversubscriptionmode of the system (i.e. the commission could be based on the differencebetween the initial projected offering price and the offering pricederived by the system as a result of its price discovery value-addedmechanisms).

Various embodiments can be used in the securitization of assets,securitization of contractual rights, and/or the matching of theanalysis and assessment of risk with the pricing of premiums requisiteto underwrite and/or hedge that risk. Other embodiments can be used forthe actual sales of units of goods and/or services. Examples include butare not limited to: 1) insurance underwriting (e.g., where thedistribution of risk might be difficult to ascertain and to price); 2)real property (e.g., real estate lots, portfolios of property,asset-backed contracts or portfolios [i.e., a portfolio of mortgages]);3) securitization of future revenue streams from contracts (e.g., thefuture proceeds from Intellectual Property [i.e., patents, trademarks,copyrights, etc.]); 4) revenues from works of art (video, music, etc.)and/or the earnings streams of entertainers and/or sports figures; 5)commodities (e.g., where the pricing and allocation of originalproduction might be derivative and/or particularly competitive due tosupply constraints [e.g., where the production run of a semi-conductorcompany like Intel is based on the derivative demand for products builtby its chip buyers—the production run can be competitively priced andallocated by using a Bidstream where all chip buyers might see eachother's demand], where there might be inconsistent quality and/or flowof supply that requires inspection and/or confirmation before a bindingsale can be consummated, etc.)); 6) labor and/or other services (e.g.,where allocation might vary with supply, where job confirmation iscontingent on inspection and/or interview of the job candidates, etc.);7) used real property (e.g., where there are a number of units to bedivided in quantity lots of varying sizes, where final sales might beconditional upon satisfactory inspection, etc.); and 8) among many otheruses.

Computer Aspects

The system utilizes the technological art of conventional electronic(digital) computing, computers, computer systems, and networks.

The devices contained in the computer systems associated with the systemare typical of conventionally installed computer configurations, and areintended to represent a broad category of such computer components thatare well known in the art. Thus, Intel-processor-based platforms can beused, but numerous other platforms will also suffice, such as:Macintosh-based and/or Unix/Linux-based platforms, platforms withdifferent bus configurations, dumb clients, networked platforms,multi-processor platforms, other personal computers, workstations,mainframes, navigation systems, and the like. Software components wouldinclude but not be limited to: operating systems; software developmentenvironments (BEA, Web Sphere, etc.), viewing software, documentmanagement software, communication software; network software, networkmanagement software; customized applications; and maintenance/utilitiessoftware, among other applications.

One embodiment includes a computer program (software) that is acomputer-readable medium/media with computer instructions stored in/onthe medium/media, which can be used to program a computer to perform themethod of various embodiments. The storage device can include but is notlimited to: any type of disk, including floppy disks, optical disks,DVD, CD ROMs, magnetic optical disks, RAM, EPROM, EEPROM, magnetic oroptical cards, or any type of media suitable for storing electronicinstructions. Other storage components can include: mass storage devicesincluding redundant and/or RAID storage setups, and file backup, restoredevices, and disaster recovery services.

Other hardware components can include but are not limited to: servers;telecom and network components (e.g., routers, switches, etc.), securitysystems (e.g., firewalls), load balancers, and network infrastructure(e.g., LAN/WAN connections and cabling), among other components.

The computer instructions in the computer program noted above can belocated in an electronic signal, transmitted over a data network, whichperforms the method of described embodiments when downloaded into acomputer system. The computer instructions are in the form of data beingtransmitted over a data network. In some embodiments, computerinstructions are transmitted in electronic signals through cable,wireless, and/or satellite, or by other means of transmission now knownor yet to be discovered.

Stored on any one of an array of computer-readable media, variousembodiments include the software for controlling the hardware of thegeneral purpose and/or specialized computer or microprocessor, and forenabling the computer or microprocessor to interact with a human user, asoftware agent, and/or with other ways and means of utilizing theresults of any embodiment. Such software can include, but is not limitedto, device drivers, operating systems, and various user applications.Ultimately, such computer-readable media include the software forperforming the previously described method in various embodiments.

System Software

The software is encoded using any suitable computer language. Portionscan be encoded using HTML. Providing suitable code is well within thecapabilities of one of ordinary skill in the art in light of thisdisclosure. An example of suitable software in shown in FIG. 25, andexplained hereinafter.

The Participant Module 22 contains the features necessary for theParticipant to interact with the system (e.g., system access, makingReservation Rights requests, configuring Participant display and otherpreferences, viewing Bidstreams and overlays, etc). The ParticipantModule 22 can be implemented with standard software technologies througha web browser (e.g., HTML, XML, Java) or built as a stand-aloneapplication (C++). It connects to the host system through Internetnetworking protocols (e.g., http) and security (e.g., PKI). It isunderstood that in different embodiments, the distribution of featuresbetween Participant Module 22 and the host system server will vary, asis the case for other of the modules.

The Suitability Module 24 is used by members of the Issuer Group toenter and manage Participant account data (e.g., Participant ID,password) and set account limitations (e.g., credit limits), andconfigure Participant-specific system usage (e.g., messaging rules,consents). This information is stored in the Registry Module 38. Thismodule 24 can be implemented with standard software technologies througha web browser (e.g., HTML, XML, Java) or built as a stand-aloneapplication (C++). It connects to the host system through Internetnetworking protocols (e.g., http) and security (e.g., PKI).

The Implementer/Operator Module 26 is used by the Bidstream designer,Issuer Group/Seller, and/or third-party operator to set up a givenBidstream (e.g., Bidstream type, initial price/yield range, allocationlimits, etc.). This module can also be used to configure defaults (e.g.,display characteristics and screen elements) and enable features (e.g.,overlays, event alerts, etc.). This module can be implemented withdeveloper environments (e.g., BEA WebLogic, Web Sphere) and customized(e.g., Java, Java Enterprise Beans, etc.).

The Issuer Group/Seller Module 28 is used to monitor and manage thebuilding of a Bidstream. This is also where the final allocation andpricing are delivered when the Bidstream closes. Module 28 can beimplemented with standard software technologies through a web browser(e.g., HTML, XML, Java) or built as a stand-alone application (C++). Itconnects to the host system through Internet networking protocols (e.g.,http) and security (e.g., PKI).

The Workflow Manager Module 30 is used to configure, modify, and manageprocesses, particularly between modules. Module 30 is also used toconfigure and manage policies (e.g., delegation, escalation,notification, audit) and make changes in response to process efficiencyreporting. Module 30 can be implemented with developer environments(e.g., BEA WebLogic, Web Sphere) and customized (e.g., Java, JavaEnterprise Beans, etc.). It connects to the host system through Internetnetworking protocols (e.g., http) and security (e.g., PKI).

The Web Services Module 32 handles process and data transport to andfrom the host system through a services and connector registry. Module32 can be implemented using standards tools (e.g., Java, J2EE, etc.) andusing standard networking (e.g., SOAP, W3C), standard protocols (e.g.,tcp/ip, http, etc.). and security protocols (e.g., https, SSL, etc.)

The Bidstream Database Module 34 handles all the major processes forbuilding and managing a Bidstream (e.g., accepting Reservation Rightrequests, calculating Bidstream status and statistics, adding/cancelingBidBlocks, calculating allotments and pricing). Module 34 can beimplemented by using standard database technology (e.g., Oracle, DB2),with custom programming (e.g., isql, rpc, etc.), and include otherservices (e.g., caching, persistence technology, object services,replication, versioning).

Internal Communications and Routing Module 36 connects the othermodules, and can be implemented with a standard programming language(C++).

The Registry Module 38 stores and manages all system theParticipant—specific, Bidstream-specific, and IssuerGroup/Seller-specific information necessary for operations (e.g.,Participant management, authorization [including key and certificates],activity logs). Module 38 can be implemented by using standard databasetechnology (e.g., Oracle, DB2), with custom programming (e.g., isql,rpc, etc.), and include other services (e.g., caching, persistencetechnology, object services, replication, versioning).

The Deal Database Module 40 allows the system to manage multipleBidstreams and screen Participant access requests according to theirmeeting suitability requirements. Module 40 can be implemented by usingstandard database technology (e.g., Oracle, DB2).

The Reservation Rights Calculator Module 42 is a simple application thatinteracts with Participants to calculate one or more ReservationRequests for allotments at price/yield and volume combinations,according to the investing/buying strategy of the Participant. Module 42can be implemented with a standard programming language (C++).

The Oversubscription Engine 46 is used to monitor and assist theBidstream Database, particularly in cases where demand for BidBlockunits exceeds supply. Its primary function is to manage an overallotmentbuffer, acknowledging new requests that exceed the total unit allotment,and canceling earlier accepted and reserved Reservation Rights, usuallyat the lowest price/yield point in the Bidstream. Module 46 can beimplemented with a standard programming language (C++).

The Overlay Engine 48 monitors the building of the Bidstream andcalculates standard visual information templates that can be layered onthe graphic representation of the Bidstream or added elsewhere on theDemand Display. Module 48 can also handle ad hoc queries from systemusers to calculate participant-specific overlays or those containingprojections and/or simulations. Module 48 can be implemented by usingstandard database technology (e.g., Oracle, DB2), with customprogramming (e.g., isql, rpc, etc.).

The Event Monitor 50 monitors Bidstream building activity for enablessystem users and applications to configure rule based “triggers” ornotifications that are distributed based on measurements that exceed aparticular threshold. The Event Monitor 50 can also initiate activity inother modules (e.g. initiate requesting an overlay, generate and route areport, etc.) based on these event-driven criteria. Module 50 can beimplemented with developer environments (e.g., BEA WebLogic, Web Sphere)and customized (e.g., Java, Java Enterprise Beans, etc.).

The Messaging Engine 52 is used to configure and operate messagingservices within the system and also to and from the system. Module 52can be implemented with developer environments (e.g., BEA WebLogic, WebSphere), customized (e.g., Java, Java Enterprise Beans, etc.) and usesstandard messaging protocols (e.g. SOAP), transports (e.g., http), andsecurity (e.g. PKI, etc.).

The Document Manager Module 54 stores and manages offering/salesdocuments (including multi-media), assures document delivery whererequired, and generates reports. This module also contains versioning,tracking, and audit functions. Module 54 can be implemented withdeveloper environments (e.g., BEA WebLogic, Web Sphere) and customized(e.g., Java, Java Enterprise Beans, etc.).

The following provides further detail of certain of the modules in termsof Function/Action, Data Passed, Interactions, and Description.

Function/Action Data Passed Interacts With Description ParticipantModule 22 Opening Portal Request System Access Web Services, RegistryParticipant networks to Interface system host. Sign On ParticipantID/Cookie Web Services, Registry Participant requests system access.Authentication Password/Cookie Web Services, Registry Participantidentifies himself and provides security information. This alsoactivates a Registry session so all Participant profile information canbe used by the system. Reset Password Old Password/New Web Services,Registry Participant can reset Password Participant ID and passwordinformation. Override Default User-defined Demand Web Services, RegistryParticipant can override Display Display Preferences display defaults(axes, Preferences layout, color coding, etc.). Configure Variables,Parameters, Web Services, Participant can review Overlays Criteria usedby Overlay Registry, Overlay available Overlays Engine Engine (Historic,Weighted, Large Block, Oversubscription, etc.) and modify anyParticipant variable defaults. Configure Event User-defined Variables,Web Services, Participant can review Monitor Alerts Parameters, Criteriaused Registry, Bidstream and modify default by Event Monitor Database,Messaging Bidstream event criteria Engine (e.g., % of Total Allotmentreserved, pricing momentum, Oversubscription status, etc.) that triggerEvent Monitor module and initiate event notification according tomessaging rules. Configure Settings for Messaging Web Services,Participant can set Messaging Registry, Messaging criteria for desiredtypes Profile Engine of and periods of system messaging. ConfigureSettings for Document Web Services, Participant can set DocumentDelivery Registry, Document additional criteria for Profile Managerelectronic offering document and multimedia delivery (default set byIssuer Group). List Deals Request Deals Web Services, Deal Participantcan request Database list of open Bidstreams. Select Bidstream RequestBidstream View Web Services, Participant can request Bidstream Databaseview of specific Bidstream (including Participant's accepted andregistered BidBlocks). Access Access Reservation Right Web Services,Participant can request Reservation Calculator Reservation Right accessto Reservation Rights Calculator Calculator Right Calculator. UseReservation Total Amount to Work Web Services, Participant can inputRights Calculator With and Price Reservation Right Total Amount to Work(Yield)/Volume Calculator with and interactively Reservation Rights trydifferent Requests Reservation Rights requests and view results andbalances. Create, Modify, Price (Yield)/Volume Web Services, Participantcan make, Approve, Delete, Reservation Rights Registry, Bidstreammodify, approve one or Search Requests Requests Database moreReservation Right requests and delete previous Reservation Rightrequests. Participant can also search his Reservation Right requeststatus. Modify Demand Demand Display Options Web Services, Participantcan modify Display Bidstream Database display of current Bidstream.Select Overlay Overlay Display or Web Services, Display current Overlaystatistics Bidstream Database, Bidstream with selected Overlay EngineOverlays. Encrypt/Decrypt Send/Receive Web Services Transmissions to andTransmission from the system can be encrypted and decrypted. SuitabilityModule 24 Create, Modify, Delete, Disable, Search, Subscribe, ApproveParticipant ID Participant ID Web Services, Registry Issuer Group/Sellersets Participant ID. Password Password Web Services, Registry IssuerGroup/Seller sets initial Participant password. Participant ParticipantData Web Services, Registry Issuer Group/Seller Profile enters anyParticipant account specific data. Suitability Regulatory Limits WebServices, Registry Issuer Group/Seller Profile identifies what types ofBidstreams Participant may access and any limitations. Credit LimitsBidding and BidBlock Web Services, Registry Issuer Group/Seller Limitsidentifies limits to the monetary or unit amounts Participant is allowedin a given Bidstream or a group of Bidstreams. Messaging DefaultMessaging Data Web Services, Registry Issuer Group/Seller Profileidentifies mode of messaging (e-mail, fax, SMS, voice) and related data(e-mail address, phone numbers, etc.) and any transport relatedcriteria. Consent Profile Approved Electronic Web Services, RegistryIssuer Group/Seller Delivery verifies types and transmission means formessages and/or documents that have been consented to by Participant.Implementer/Operator Module 26 Set Price Range Price/Yield Range WebServices, Implementer/Operator Bidstream Database sets the price (oryield) range. Set Bidstream Geometric, Free-Bid, Web Services,Implementer/Operator Type Stratified, Dual Bidstream Database setsBidstream Demand Display type. Set Total Total Number of Units WebServices, Implementer/Operator Allocation Bidstream Database sets totalnumber of BidBlock allocation units. Set Allocation # units perPrice/Yield Web Services, Implementer/Operator Limits Point BidstreamDatabase sets any allocation limits for given price/yield points.Configure Set- Define fixed/floating Set- Web Services,Implementer/Operator sides asides Bidstream Database define conditionsfor set-aside (number of units, spread, fixed or floating, $ total vs. #of units allocation, etc.) for Dual Bidstreams. Configure Demand DisplayScreen Web Services, Implementer/Operator Display Preferences BidstreamDatabase sets display defaults Preferences (axes, layout, labels, colorcoding, etc.). Configure # units allowed over full Web Services,Implementer/Operator Oversubscription subscription Bidstream Database,sets number of units of Engine Oversubscription oversubscription bufferEngine and # of oversubscription BidBlocks that trigger cancellation ofReservation Right requests. Configure Next Formula for next WebServices, Implementer/Operator Price & price/yield point floor BidstreamDatabase enables formula that Threshold Rules sets next price/yieldpoint. In Free-bid embodiments, a formula is configured to provide afloor for new Reservation Right requests in oversubscription mode.Enable Enable Time Bar Web Services, Implementer/Operator Time/VolumeBidstream Database enables time/volume Histogram histogram of Bidstreamactivity on Demand Display. Enable Lowest Enable LPBA Display WebServices, Implementer/Operator Price BidBlock Bidstream Database enablesLPBA Counter Available on Demand Display. Display Enable Current EnableCEOP Display Web Services, Implementer/Operator Estimated BidstreamDatabase enables CEOP Counter Offering Price on Demand Display.Configure Windowing Rules and Web Services, Implementer/OperatorSplit/Multiple Criteria Bidstream Database enables split screening,Screens multiple screens, or tabbed screens and sets rules for use.Configure Variables, Parameters, Web Services, Implementer/OperatorOverlays Criteria used by Overlay Bidstream Database, enables the use ofEngine Overlay Engine Overlays (Historic, Weighted, Large Block,Oversubscription, etc.). Configure Event Variables, Parameters, WebServices, Implementer/Operator Monitor and Criteria used by EventBidstream Database, sets default conditions Event Alerts Monitor EventMonitor, and parameters of Messaging Engine Bidstream statistics thattrigger event monitor module and initiate event notification accordingto messaging rules. Configure Messaging Rules Web Services,Implementer/Operator Messaging Rules Bidstream Database, sets defaultmessaging Event Monitor, rules and default Messaging Engine transportconfigurations. Configure Document Deliver Rules Web Services,Implementer/Operator Document and Requirements Bidstream Database, setsdefault document Manager Event Monitor, delivery rules and MessagingEngine, requirements. Document Manager Issuer Group/Seller Module 28Request Request Bidstream Web Services, Approved members of BidstreamStatus Statistics Bidstream Database the Issuer Group/Seller can monitorBidstream activity statistics. Request Reports of Approved Web Services,Approved members of Participant Status Participant Price/VolumeBidstream Database, the Issuer Group/Seller Requests Document Managercan monitor and receive reports of specific Participant ReservationRight requests and summary logs. Request Request Participant WebServices, Approved members of Participant Activity Logs BidstreamDatabase, the Issuer Group/Seller Activity Document Manager can monitorand receive reports of specific Participant activity and summary logs.Request Bidstream BidBlock Web Services, Upon closing of the AllocationAllocations Bidstream Database, Bidstream, approved Document Managermembers of the Issuer Group/Seller can receive lists of finalallocations and pricing of those BidBlocks. Workflow Manager 30Configure Module Option Settings Participant, Suitability, The WorkflowManager Workflow Issue Group/Seller, is used to create, Web Services,modify, delete, disable, Bidstream Database, search, subscribe, andRegistry, Deal approve processes of Database, Reservation the othermodules, Rights Calculator, workflow rules, and Oversubscriptioninitiate the acquisition Engine, Overlay of internal system Engine,Event Monitor, transport, memory, and Messaging Engine, storageresources for Document Manager interaction between the modules. WebServices Module 32 Authorize Transmission Participant, Suitability, TheWeb Services Transport Authorization Issue Group/Seller, module checksthe Bidstream Database, Registry to authorize all Registry, Dealrequests by Issuer Database, Reservation Group/Seller, RightsCalculator, Implementer/Operator, Oversubscription or Participants. TheEngine, Overlay Registry is also checked Engine, Event Monitor, forauthorization Messaging Engine, whenever automatically Document Managergenerated processes occur (e.g., events triggered by the Event Monitor,periodic Bidstream transmissions, etc.). Package Data Transport-specificData Participant, Suitability, The Web Services Encoding IssueGroup/Seller, module packages data Bidstream Database, (Bidstreams,overlays, Registry, Deal reports, etc.) requested Database, Reservationby Issuer Group/Seller, Rights Calculator, Implementer/Operator,Oversubscription or Participants. These Engine, Overlay packages areencoded Engine, Event Monitor, according to the Messaging Engine,receiver-specific Document Manager information in the Registry, themessaging rules, and known transport protocols. Encrypt/DecryptEncrypted Data Participant, Suitability, The Web Services IssueGroup/Seller, module can also encrypt Bidstream Database, and decryptRegistry, Deal transmission to and Database, Reservation from thesystem. Rights Calculator, Oversubscription Engine, Overlay Engine,Event Monitor, Messaging Engine, Document Manager Transport ModuleProvided Data, Participant, Suitability, The Web Services PackageBidstreams, Issue Group/Seller, module acquires Bidstream Database,network resources for Registry, Deal transmission and Database,Reservation supports the activity Rights Calculator, sessions requestedby Oversubscription the other modules. Engine, Overlay Engine, EventMonitor, Messaging Engine, Document Manager Bidstream Database 34Request Request Suitability Registry On any Reservation SuitabilityRights request, the Bidstream Database verifies Participant profile foracceptability of Participant to make a given request (suitability,credit limits, consents, etc.). Check Request Preferences RegistryBidstream checks any Participant Participant Preferences Preferences(Bidstream defaults, messaging profile, etc.). Accept Reservation RightsWeb Services, If the pending Reservation Request Participant ReservationRight Rights Requests request BidBlocks are available, the Bidstreamaccepts, registers, and reserves those Bidstream BidBlocks. RecalculateInternal N/A Bidstream Database is Bidstream recalculated with newregistered BidBlocks included. Display Transmit Bidstream Web Services,Bidstream Database Bidstream Registry, Participant, either calculatesImplementer/Operator Bidstream Issuer Group/Seller, representation for aMessaging Engine Participant's Demand Display or sends Bidstreamstatistics for Participant to render Demand Display locally. CalculateLowest Internal N/A Bidstream Database Price/Highest monitors lowestYield BidBlock price/highest yield Available BidBlock available. DisplayLowest LPBA Web Services, Bidstream Database Price/Highest MessagingEngine, sends current LPBA to Yield BidBlock Participant Participant forDemand Available Display screen. Calculate Current Internal N/ABidstream Database Estimated calculates projected Offering Priceoffering price (if any) from Bidstream statistics and Issuer/Sellerformula for calculating same. Display Current CEOP Web Services,Bidstream Database Estimated Messaging Engine, sends current CEOP toOffering Price Participant Participant for Demand Display screen. SendCurrent Bidstream Statistics Web Services, Bidstream Database BidstreamImplementer/Operator, outputs current Statistics Issuer Group/Seller,Bidstream variables Oversubscription necessary for Bidstream Engine,Overlay statistical summary Engine, Event Monitor, tables (containing %Messaging Engine, subscribed, mean, Document Manager median, weightedaverage, etc.), Activity or Summary Logs, and as input toOversubscription Engine, Overlay Engine, Event Monitor, MessagingEngine, and Document Manager Send Participant Transmit Participant WebServices, Registry Bidstream Database can Status Position(s) inBidstream send Participant- specific Overlays and reports that showposition of Participant's still registered BidBlock positions inBidstream. Add BidBlock # of BidBlocks to Add Oversubscription Ifinitiated by Engine Oversubscription Engine, the Bidstream may addadditional BidBlocks within the limits of the buffer rules. AcceptAccept and Reserve Bidstream Database Within OversubscriptionOversubscription Units Oversubscription buffer Request limits, thesystem can accept additional Reservation Right requests above thecurrent next price threshold. Cancel BidBlock # of BidBlocks to DeleteOversubscription If one or more of a Engine given Participant's BidBlockunits are cancelled by the Oversubscription Module, the BidstreamDatabase deletes the BidBlock. Notify Notify Participant of WebServices, If one or more of a Participant of canceled Reservation RightOversubscription given Participant's Cancelled request Engine, BidstreamBidBlock units are Reservation Database, Registry, cancelled, the RightsRequest Messaging Bidstream Database initiates Participant notificationof lost Reservation Right. Reset Demand New Demand Display Web Services,If the Bidstream Display Layout Participant requires a new layout (e.g.,a new price range during oversubscription mode), new axes labels arecalculated for the new Demand Display layout. Reset Participant NewReservation Right Registry, Web If Participant positions PositionsPositions Services, Messaging must be moved during a Engine, ParticipantDemand Display reset to maintain the allotment limits at a given pricepoint for a Bidstream type, affected Participants requests are moved tothe adjacent price point and the Participant is notified. CloseBidstream Closing of Bidstream Registry, Web At a predetermined MessageServices, Messaging, time, acceptance of new Issuer Group/Seller,Reservation Right Participant requests is terminated and the Bidstreamis closed. Calculate Internal N/A Upon closing the Allotments Bidstream,the system calculates the allotments based on accepted and registeredReservation Rights. Calculate Pricing Internal N/A If the pricingformula is other than pay what Participant bids, the system calculatesthe price of each allotment based on the disclosed formula (e.g., mean,median, weighted average, etc.). Notify Allotment BidBlock Allotmentsand Registry, Web Both final allotments and Pricing Pricing Services,Messaging and pricing of accepted Engine, Issuer and reservedGroup/Seller, Reservation Right Participant requests are sent to theIssuer Group/Seller and [optionally] the Participants. Registry 38Receive Participant Profile Data Web Services, The Registry receivesSuitability Suitability and stores Participant Profile profile dataprovided by the Issuer Group/Seller. Authenticate Participant ID and WebServices, The Registry logs on Participant Password Participant andauthenticates Participant system access. Reset Password Old Password/NewWeb Services, The Registry can reset Password Participant authorizedParticipant access information. Store Participant User-defined DemandWeb Services, The Registry can Display Display Preferences Participant,Bidstream store/manage Preferences Database Participant-specific displaypreferences. Store Participant Variables, Parameters, Web Services, TheRegistry can Overlay Criteria used by Overlay Participant, Overlaystore/manage Preferences Engine Engine, Bidstream Participant-specificDatabase overlay preferences. Store Participant User-defined Variables,Web Services, The Registry can Event Monitor Parameters, Criteria usedParticipant, Event store/manage Preferences by Event Monitor Monitor,Bidstream Participant-specific Database Event Monitor Alert criteria.Store Messaging Settings for Messaging Web Services, The Registry canProfile Participant, Messaging store/manage Engine Participant-specificmessaging profile and messaging rules. Store Document Setting forDocument Web Services, The Registry can Preferences Manager Participant,Document store/manage Manager Implementer/Operator, Issuer Group/Seller,and Participant-specific document profile and document delivery rules.Authorize Suitability Criteria for Bidstream Database The Registryprovides Suitability Reservation Right suitability criteria Requestsvalidation to the Bidstream Database when it receives a ReservationRight request. Provide Participant-specific Bidstream Database TheRegistry can Participant Display Overrides provide Participant- Displayspecific display criteria Preferences to the Bidstream Database forbuilding Demand Display views. Store Participant Participant BidstreamBidstream Database The Registry stores logs Bidstream Activity Logs ofParticipant Bidstream Activity activity and history. Provide ParticipantSettings Web Services, The Registry supports Participant ReservationRights other modules with Preferences Calculator, OverlayParticipant-specific data Engine, Event Monitor, on preferences andMessaging Engine, settings. Document Manager Deal Database 40 ReceiveParticipant Deal Criteria Participant, Web Participant requestsParticipant Deal Services, Messaging types of deals he is Request Engineinterested in and any limiting or sorting criteria. Validate RequestSuitability Registry Deal Database checks Suitability ParticipantSuitability Profile before sending one or more listings of currentlyopen Bidstreams. Sort Deals Internal N/A Deal Database prepares andsorts open Bidstream list meeting Participant request criteria that: 1)are open; 2) meet Participant request criteria; and 3) meet Participantsuitability criteria. Send Deals List of Deals Participant, Web DealDatabase sends list Services, Messaging of available Bidstreams Enginethat meet request criteria or are selected by Participant preferences.Reservation Rights Calculator 42 Receive Request $'s Available to BidParticipant Reservation Right Total Available Calculator receives totalmonetary or unit quantity amount Participant would like to work with.Receive Request Price/Volume Reservation Participant Reservation RightRight Requests Calculator receives one or more Reservation Rightrequests for allocations. Calculate Internal N/A Reservation RightReservation Calculator calculates Right the number of BidstreamBidBlocks necessary to fill request. Check Price/Volume ReservationBidstream Database Reservation Right Reservation Right RequestsCalculator checks Right availability whether the current ReservationRight request can be accepted. Send Balance Reservation Right TotalsMessaging Engine, Reservation Right and Balance Web Services, Calculatoreither rejects Participant request (if Reservation Right BidstreamBidBlocks are not available) or sends calculation of Reservation Rightrequests and balance of request total available. Request RequestAdditional Bids Messaging Engine, Reservation Right Additional WebServices, Calculator asks Reservation Participant Participant whetherthey Right Requests would like to re-bid and/or request additionalReservation Rights. Oversubscription Engine 46 Monitor InternalBidstream Database, Based on Total Bidstream Status Event MonitorAllocation units set by Implementer/Operator, determine % of Bidstreamreserved. Based on pricing momentum, project time to OversubscriptionEvent. Initiate Addition # of Units added to Bidstream Database AsBidstream hits of Bidstream as condition of where total OversubscriptionOversubscription Buffer BidBlock units allotted Units are reserved,Oversubscription Module can make available additional BidBlock unitsaccording to threshold and buffer rules and allow display on DemandDisplay. Cancel # of Units to be cancelled Bidstream DatabaseOversubscription Reservation Module can initiate the Right Requestcancellation of one or more lowest price Reservation Right requestsbased on whether Bidstream rules optimize total proceeds or require afixed total # of units. Overlay Engine 48 Monitor Bidstream StatisticsWeb Services, The Overlay Engine Bidstream Participant, monitors theBidstream Implementer/Operator, Database statistics and IssuerGroup/Seller, recalculates various Bidstream Database, overlays thathave been Registry, Event configured by the Monitor Implementer/Operatoror the Participant. Transmit Overlay Bidstream Overlay Web Services, TheOverlay Engine Participant, transmits Bidstream Implementer/Operator,overlays that have been Issuer Group/Seller, requested by the BidstreamDatabase, Participant, Registry, Event Implementer/Operator, Monitor,Messaging Issuer Group/Seller, or Engine have been triggered by theEvent Monitor. Event Monitor 50 Monitor Events Bidstream Statistics, WebServices, The Event Monitor Oversubscription Statistics, Participant,monitors the Bidstream Overlay Statistics Implementer/Operator, Databasestatistics and Issuer Group/Seller, recalculates thresholds BidstreamDatabase, that might trigger Registry, Overlay activity by other Engine,Messaging modules. These Engine thresholds are event criteria that havebeen configured by the Implementer/Operator, Issuer Group/Seller, or theParticipant. Initiate Event Event Alerts Web Services, If an Event Alertis Alert Participant, triggered by exceeding Implementer/Operator,thresholds configured Issuer Group/Seller, by Bidstream Database,Implementer/Operator, Registry, Overlay Issuer Group/Seller, or Engine,Messaging the Participant, the Engine, Document Event Monitor triggersManager the system activity and initiates transmission (sendingBidstreams, activity logs, etc.). Messaging Engine 52 Initiate MessageParticipant Profile Registry, The Issuer Oversubscription, Group/Seller,Event Monitor Implementer/Operator, or Participant may set up andautomate event- driven (e.g., oversubscription, lost Reservation Right,etc.) and/or periodic Bidstream Demand Display. Check ParticipantProfile Registry Before sending any Participant ID, requested orperiodic Messaging Demand Displays Profile, and representations,Consents Overlays, Event Alerts, or reports, the Messaging Module checksParticipant profiles for Participant messaging parameters. TransmitBidstream Displays, Web Services, The Messaging Engine Message BidstreamStatistics, Bidstream Database, services the Bidstream Overlays,Documents Oversubscription Database, Overlay Engine, Overlay Engine,Event Monitor, Engine, Event Monitor, and Document Manager DocumentManager according to messaging rules set by the Participant,Implementer/Operator, or Issuer/Seller and according to their requestsfor activity or information. Document Manager 54 Store Offering OfferingDocuments Web Services, Issuer The Document Manager DocumentsGroup/Seller stores/manages offering documents provided by the IssuerGroup/Seller. Send Offering Offering Documents Web Services, TheDocument Manager Documents Participant, transmits offeringImplementer/Operator, documents provided by Issuer Group/Seller, theIssuer Group/Seller. Registry, Suitability, Messaging Send BidstreamBidstream Activity Logs Web Services, The Document Manager Activity LogsParticipant, generates activity Implementer/Operator, reports based onIssuer Group/Seller, Participant activity and Registry, BidstreamBidstream activity and Database, Messaging transmits them when Enginerequested by authorized Participants, Implementer/Operators, IssuerGroup/Sellers. Send Participant Reports of Approved Web Services, TheDocument Manager Status Reports Participant Price/Volume Participant,generates Participant Requests Implementer/Operator, status reportsbased on Issuer Group/Seller, Participant activity and Registry,Bidstream Bidstream activity and Database, Messaging transmits them whenEngine requested by authorized Participants, Implementer/Operators,Issuer Group/Sellers. Send Final Final Report of Approved Web Services,The Document Manager Allocations Participant Price/Volume Participant,generates Final Requests Implementer/OperatorIssuer Allocation reportsGroup/Seller, listing Participant Registry, Bidstream allocations andpricing, Database, Messaging and transmits it to the Engine IssuerGroup/Sellers.

Detailed Example U.S. Securities Pricing Environment

Embodiments can be used over the range of pricing optimization andallocation determinations in just the new issuance of equity and/or debtsecurities alone, including, but not limited to: 1) pre-filing testingof the waters; 2) a post-filing creation of a Bidstream of ReservationRights before and/or after the registration of any securities iseffective; 3) the offering of warrants or similar instruments, beforeand/or after the registration of securities; and 4) even in a full-blownauction mode, whereby the placement of reservations in the system servesas the binding basis for the placement of the anticipated securities.

Certain securities-related embodiments can be adjusted and/or scaledback to accommodate compliance with prevailing securities laws andregulations of relevant jurisdictions. While it is beyond the scopeherein to examine every jurisdiction, financial market, and financialexchange for which the System is applicable, the following is directedto embodiments that apply to the largest market for new issuances—thatof the United States securities market. The following is illustrativeonly and not intended to constitute legal advice.

Since the set-up and breakdown of temporary marketplaces for non-bindingindications of interest that do not execute or trade securities is stilla novel concept, there are no, direct rulings (or No-action indications)by the SEC as to how embodiments of the present system would fit withinthe regulatory framework (of the U.S. Securities Act and the SecuritiesExchange Act, the U.S. Indenture Act, and the rules and regulationsrelated to new issuances of equities, corporate debt and municipalsecurities) and remain consistent with the stated policy goals ofsimultaneously developing efficiency and improving investor protection.Nevertheless, the following examines previous treatments of variousprimary and secondary market methods for handling actual securities forembodiments in the U.S. until the issues surrounding electronicindications-of-interest are clarified by the Securities ExchangeCommission.

Written vs. Oral Communications

In today's markets, where speed is a priority, significant matters oftenare communicated telephonically. For instance, it is common andincreasingly popular, for security holders to vote proxies and eventransfer assets by telephone, where permitted under applicable statelaw. However, electronic communications do not always fit neatly intoone category or the other. While often thought of as a substitute fortelephonic communications, e-mail messages are fixed in graphic form,can be retained, and often are much more detailed than oralconversations. Due to concerns that electronic communications can easilyinfluence prospective investors, the SEC has been reluctant tocharacterize e-mail including attachments as other than writtencommunications.

In addition, investors can place orders to trade securities bytelephone. The SEC believes these practices have developed becausebusiness can be transacted as effectively by telephone as it can onpaper. It is believed that the request for a Reservation Right is anoral communication, since it is akin to the placing of a phone call asan expression of interest to a member of the underwriter syndicate andtheir associated broker-dealer network under the current manual bookbuilding process. However, the Commission has previously consideredelectronic communications to be written, and has yet to address thenature of an interactive electronic communication component of theSystem that replicates the interaction that would currently occur in aseries of phone calls between a potential investor and his broker underthe current manual book building process.

Waiting Period Communications

During the post registration-filing, called the waiting period, theunderwriter syndicate can test the market by communicating with theircustomers, limited only by the antifraud provisions of the SecuritiesAct and Securities Exchange Act. However, the underwriter syndicate andbroker-dealers must not make offers to sell other than through thestatutory prospectus. What is deemed to be free writing is stillprohibited. It is believed that display of requests for ReservationRights are material facts and, thus not a form of free writing in thatthey are not subjective opinions, but reflect transparent, symmetric,higher quality, and more timely real-time disclosure to the investingpublic.

However, the underwriter syndicate and broker-dealers can orally solicitindications-of-interest in the new issuance and discuss the securitieswith their clients. This is collection of interest frompersons/institutions is what is referred to in the opening of thispatent application as the manual book building process, wherein theunderwriter syndicate accesses the interest and begins to make decisionsabout pricing the new issuance and the allocation of participation inthe issuance. This is where embodiments create a more open, efficient,equitable, and fair determination of the pricing/demand elasticity, andthereby optimize the pricing and fair allocation of the anticipateddistribution of the securities.

Before effectiveness, communications on an e-broker's as well as on theissuer's website that make an offer to sell or solicit an offer to buycan only be made by means of a prospectus complying with securities lawor by communications that come within the safe harbor of securities law.Communications that are merely instructional and are not designed togenerate interest in a particular offering typically areunobjectionable, even if they do not fall within the safe harbor ofsecurities law.

This is an additional consideration for an underwriting syndicate tohave the system implemented by a third party. The underwriting syndicatewould still be responsible for all regulatory obligations other than theestablishment and optimization of the pricing of the new issuance, andthus might coordinate the strategy and timing of the operation of aSystem embodiment by such third party.

Again, the databases generated by the System create time and costsavings to members of the Issuer Group in automating as many of the redherring and statutory prospectuses delivery processes as are possibleand, assisting in the initiation and tracking of the required manualprocesses.

General Solicitation

One concern with respect to online private offerings relates to theprohibition against general solicitation. The prohibition was originallyintended to ensure that access to private offerings was limited tosophisticated or accredited investors who do not need the protections ofthe federal securities laws. The SEC has indicated that, under certaincircumstances, websites affiliated with registered broker-dealers mightbe used to raise capital privately, as long as prospective investors arescreened before they are allowed to view the offering materials.

To resolve the issue under securities law, the electronic auctionpresentations described in the released SEC No-action letters are madepart of a prospectus permitted by securities law. The letters state thatthe auction screens must be made accessible only through the electronicprospectus. This means that a potential investor could access theauction screens only by entering the electronic prospectus and clickinga button from within the prospectus that leads to the auction. Thismethod makes the auction screens part of the electronic prospectus.

Access to the auction screens from a hyperlink within the electronicprospectus makes the auction site part of the permitted prospectus. Incontrast, a hyperlink from a separately accessible auction site to theelectronic prospectus would merely cause the documents to be deliveredtogether. Without additional steps to clarify that the auction screensare part of the prospectus, the auction screens would not be part of theelectronic prospectus. Therefore, making the auction screens availableseparate from the electronic prospectus, and simply hyperlinking to theprospectus, will not alleviate the concern that the auction screens arenon-conforming prospectuses.

The method described, whereby the underwriter makes the auction siteaccessible through the electronic prospectus, is not the exclusivemethod to make a document part of the electronic prospectus. Forexample, the electronic prospectus could be represented by means of itstable of contents, with each item in the table presented as an activehyperlink to the section of the prospectus that the item represents. Ifthe auction site is presented as an item in the table of contents, thehyperlink to the auction site from the table of contents generally wouldmake the auction site a part of the prospectus. Similarly, it isbelieved that the electronic auction could be presented on a web pagenext to the electronic prospectus along with a statement that theauction web page is part of the prospectus.

In some embodiments, to meet registration filing requirements of variouslegal jurisdictions, adjustments to the registration filing statementsor to the functioning of the System might be required. For example, inthe United States, the Securities Act permits a registrant to omitinformation concerning the public offering price, price-relatedinformation and the underwriting syndicate from a registration that isdeclared effective. In such cases, the information omitted would eitherbe included in the final prospectus and incorporated by reference intothe registration statement, or included in a post-effective amendment tothe registration statement. Relevant information must be disclosed in apost-effective prospectus, or it might be revised in a post-effectiveamendment to the registration statement (e.g., a term sheet).

The red herring prospectus, and any implementation of the system, mustalso comply with securities regulations requiring that any preliminaryprospectus to be used before the effective date of the registrationstatement (or any post-effective prospectus that omits informationpermitted by law), and will be made whole through a pricing amendment,contained in red ink, the caption Subject to Completion, and aspecifically prescribed legend disclaiming any intention to sell orsolicit and offer to buy the securities of the new issuance.

An electronic display of a dialog box with these cautions/stipulationcan be displayed requiring the prospective investor or their agent toacknowledge their acceptance of these conditions before being allowedfurther access to the system. This electronic record of acknowledgement,in fact, provides the issuer/underwriter better liability protectionthan a paper version, which only assumes that the reader acknowledgesthat the prospectus is incomplete and that further information will berequired before a bona fide sale or offer to sell will be conducted.

While the issuer and underwriter syndicate have discretion in using theSystem to determine and optimize the offering price before or after theeffective date, their leeway is limited. The timing of theimplementation of the Bidstream creation process and its duration is astrategic decision, which might be made by the issuer/underwriter basedon this pre- and post-effective window.

Thus, Implementers within the post-effective window can employelectronic and possibly manual notifications to ensure that finalprospectus and price amendment distributions requirements are met.Again, the databases generated by the System create time and costsavings to the members of the Issuers Group in automating and/orsupporting as much of the process as is possible, and assisting controlof the required manual processes.

Typically, when the pricing terms of an offering are finalized, changesare often made to the size of the offering by adjusting the offeringprice and/or the number of shares to be registered. However, the Issueris permitted to register securities in an offering by specifying onlythe title of the class of securities to be registered and the proposedmaximum aggregate offering price. Thereafter, an issuer is not requiredto register additional securities if the number of shares increases,provided that the aggregate dollar amount of the offering does notexceed the maximum aggregate offering price previously registered. Also,registration is not required for a decrease or increase of the offeringsize (if such increase does not require the registration of additionalsecurities) and/or a deviation from the specific price range, providedthat the combined size and price do not exceed more than 20 percentchange from the maximum aggregate offering price previously registered.

Where the system is used during an effective registration in the UnitedStates, the issuer might have to make a decision as to whether to letthe system run its course and make the necessary amended filings andmaximize the proceeds to the company, or to cap the aggregate offeringsize under the permitted 20 percent overage restriction. This can beachieved through the system itself, in the case of oversubscriptionapproaching the 20 percent overage restriction (including a prudentbuffer) whereby a corresponding dollar amount of Reservation Rights isremoved at the lowest price (i.e., more than one Reservation Right mighthave to be removed to accommodate a higher price Reservation Right) tokeep the aggregate maximum offering price within the chosen boundary.This is a strategic choice of the issuing company and its underwriters,and not a limitation of the System.

Plan of Distribution

In some regulatory and legal jurisdictions, securities regulations mightrequire a description of the plan of distribution of securities to thepublic and the terms on which the distribution is to be made. To theextent that some or all of the pricing and allocation decisions can bemade with the assistance of the System, this might need to be disclosedwith the registration statement.

In this case, the Issuer Group might be advised to request a pre-filingconference with the SEC to fully disclose and explain theirimplementation of embodiments of the system, as well as request aNo-action letter until the use of the system becomes more commonplace.Registration statements that omit pricing information in reliance onsecurities rules include the price range on the cover page or, whenappropriate, the formula or method by which the price is to bedetermined. In cases of early uses of the system, and/or implementationswhere new embodiments to the basic system are anticipated, thispre-filing conference with the SEC staff becomes an opportunity for themanaging underwriter team and the SEC staff to arrive at mutually agreedlanguage and legends to be included with the registration statement andpreliminary prospectus describing the implementation of the Systemembodiment.

In any case, attention to the SEC staff initial review letter becomesparticularly important with respect to the issuer/underwriter'sdisclosure of their intent to use the system (for pricing and allocationoptimization, and the manner in which it will be implemented) because itreflects the SEC's consideration of different facets of the offering,such as legal compliance of the underwriting arrangements and the planof distribution. The SEC might request supplemental information and/orrequest revision or clarification of the registration statement.

Electronic Road Shows

There are many creative uses of the Internet to tell a company's story.Electronic prospectuses can, and do, include video, sound, graphics andinteractivity. In some System embodiments, any multi-media materialsprovided as part of the prospectus require filing, as an appendix to theprospectus, the script of any video and a fair and accurate narrativedescription of the graphic or image material, just as it would benecessary to provide to the SEC supplementary scripts and descriptionsof such material in sales material.

Electronic Roadshows—an electronic rendition of a roadshow distributedover private networks and/or the Internet—puts the SEC in a positionthat appears, on the face of it, contradictory. By and large, thepresentation of the roadshow is an electronic transmission of what waspreviously an oral communication. As previously mentioned,communications by radio or television in connection with an offering aretreated as written communications under securities law. Moreover, theterm prospectus is defined broadly under securities law as any notice,advertisement, or communication, written or by radio or television,which offers a security for sale or confirms the sale of a security. Itappears inconsistent to allow transmission of electronic roadshows overthe Internet, and yet treat e-mail communications reflecting the samecontent an oral telephonic non-transaction communications to abroker-dealer, including communication that is neither an offer nor anoffer to sell a security as prohibited written communication. Thisapparent inconsistency remains unresolved.

Indications of Interest

The Securities Act allows the publication of solicitations of interestduring the waiting period, as long as they are accompanied or precededby a red herring prospectus. An indication-of-interest can be posted ona web site and accepted electronically. Participants in the system arenot required to access the red herring prospectus before accessing,downloading, and/or printing any electronic form for indications ofinterest. However, the Issuer Group and/or Implementers might require anembodiment to require evidence of informed consent of Participants,either directly or indirectly through affirmation that a member of theIssuer Group, before sending and receiving communication related toindications of interest. The system can require previous evidence ofreceipt of the red herring prospectus, or concurrent execution ofdelivery of the red herring prospectus be executed, before a password isissued that allows a Participant to enter any anticipated offeringssections of the system, depending on offering-specific consent or globalconsent.

It is believed that a communication sent or delivered to any personpursuant to Securities law using the system (accompanied or preceded bya prospectus which meets the requirements of the Securities Act at thedate of such communication) can solicit from the recipient of thecommunication an offer to buy the security or can request the recipientto indicate on an enclosed or attached coupon or card, or by some othermanner, whether he might be interested in the security, if thecommunication contains substantially the following statement or itsequivalent:

-   -   Reservation Rights are not securities. The placement of a        request for a Reservation Right is a non-binding reflection of        interest in an anticipated offering of securities that has its        own mandatory documentation and disclosures (pursuant to the        Securities Act) prior to the effectiveness of an offer, offer        for sale, and/or sales of registered securities.    -   No offer to buy the securities can be accepted, and no part of        the purchase price can be received, until the registration        statement has become effective, and any such offer can be        withdrawn or revoked, without obligation or commitment of any        kind, at any time prior to notice of its acceptance given after        the effective date. An indication of interest in response to        this advertisement will involve no obligation or commitment of        any kind.

Reservation Rights Versus Securities

The term “investment contract” is undefined by the by the SecuritiesAct. However, certain U.S. state security Blue Sky laws pre-existing theU.S. Federal Securities Acts have generated interpretations where formwas less important than substance, thus the focus on economic reality.An investment contract has been interpreted as a contract or scheme forthe placing of capital, or laying out of money, in a way intended tosecure income or profit from its employment. It is immaterial whetherthe investment contract is evidenced by shares of stock certificates orby interests in the physical assets of a common enterprise.

It is believed that the system does not create a security in embodimentswhere a Reservation Right is reserved where it is: 1) non-binding; 2)transferable; and 3) for no value. Therefore, sections of both theSecurities. Act and the Securities Exchange Act, which rely upon theexistence of a security, might not be applicable to most embodiments ofthe present system.

Warrants

However, in some cases, Implementers might choose to offer options orwarrants instead of Reservation Rights. This creates gray areas whereinthe timing and the manner of use of the warrant embodiment might placecertain responsibilities on members of the Issuer Group, which theyshould take heed.

In an alternative embodiment, non-binding, future date warrants can beused in place of Reservation Rights. For relevant portions of theSecurities Act to become operative, there must be a sale or offer of asecurity. The law defines the term sale to include every contract ofsale or disposition of a security for value. However, a warrant or rightto subscribe to a security is itself a security by the express terms ofthe law. The fact that a restricted stock is non-transferable might notin and of itself remove it from this category. Nevertheless, a warrant,option, or right to subscribe need not be registered unless it isoffered to be disposed of for value. As a matter of defining theexercise date of a warrant, if immediately exercisable, it mightconstitute an offer to sell the security called for in the warrant, thusmaking the registration requirements applicable to that security. Thus,in the ordinary rights offering in which transferable warrants areissued to shareholders or potential investors without any consideration,the warrants themselves need not be registered. Nonetheless, in thisembodiment the exercise of the warrants reserved though the building ofthe Bidstream would in fact not occur until after the registrationbecomes effective, and particular care should be taken by theunderwriter syndicate and broker-dealers to disclose this fact.

Once the creation of the Bidstream is closed, the pricing of thewarrants becomes fixed until the offering becomes effective, even thoughno value has been exchanged. If the warrant embodiment of the Systemwere employed, the warrants would be exercised once the offering iseffective and the securities are registered for sale. The restrictedperiod commences upon mailing of the notice, and continues through theend of the period in which the security holders might decide whether toconvert.

Only once the warrant is exercised is a sale considered to take place.However, since the warrant is itself a security, securities law needs tobe taken into account. The actual material rights of the warrant, andthe security which it might be exchanged for in an offering mightconstitute a securities exchange in the interpretation of the SEC, andthus might be seen as an exchange of new securities for old, even thoughthey might be registered simultaneously. To the extent that this istrue, issuers and underwriters using the warrant embodiment method mighthave to pay particular attention to offering limitations and integrationissues that vary, based upon the aggregate size of the offering within agiven timeframe and any material changes to the charter amendment in thestate of incorporation to avoid delays.

Neither the existence of exercisable warrants or convertible securities,nor the approaching expiration date of such securities alone, wouldcause the issuer to be deemed in distribution. However, a distributioncould be present if special selling efforts, such as the solicitation toexercise the warrants or the payment of a soliciting dealer's fee, areused to encourage the exercise of the securities.

Here again, the present system can be used to deliver, and confirmdelivery of, compliant documents. This aspect of this embodiment savesmembers of the Issuer Group time, money, and effort in meeting deliveryrequirements, and can also assist in tracking and initiating manualprocesses that include delivery of required documents to persons whochose the mails (rather than electronic delivery) as their chosen methodof receipt of offering-related materials. These efficient processes ofcompleting the statutory prospectus delivery process then allow theunderwriting syndicate and broker-dealers to e-mail or mail confirmationof the sale and/or make delivery of the securities and complete thetransaction, thus streamlining the processes required for theunderwriter syndicate and broker-dealers to meet their three daybusiness deadlines. The system can also be used during thepost-effective period to meet or assist in the tracking of deliveryrequirements. The system implementation can also include a provision fornotifying broker-dealers of their delivery obligation and the date oftheir effective termination in meeting securities law requirements. Ifthe offering continues over an extended period of time, the prospectuscan be kept current under the requirements of law, another manner inwhich the system can assist the underwriter syndicate in its deliveryobligations in an efficient and cost-effective manner.

An Implementer can use an alternative embodiment to operate the systemto arrive at optimized pricing and achieve fair and equitableallocations, by conditionally selling new issuance securities in theshort window between the effective date and the 15-day deadline for afinal prospectus, subject to confirmation only after the requirements ofa prospectus or its equivalent, have been met. See below.

In this embodiment, the operation of the system reflects many aspects ofa true auction, albeit with superior transparency and feedback to thebidder, superior price-building access, competition, efficiency andoptimization of final pricing; superior methods for fair, equitable, andwidespread allocation of the new issuance; and superior methods forassisting the underwriter syndicate in meeting their disclosureobligations, and tracking and confirming the meeting of their obligationfor delivery of offering materials in compliance with SEC regulations.

It is also conceivable that some Issuer Groups might, for strategic andliability reasons, chose the operate the system in two stages: 1) tooperate one embodiment during the waiting period in conjunction with ared herring prospectus (and required/associated legends on the systemdisplays) to establish price/demand elasticity and establish a fair andequitable baseline starting price (or price range) for the benefit ofthe issuer; and 2) to run another embodiment of the system again in thepost-effective period, in conjunction with a compliant prospectus and incombination with additional selling literature and other allowedinformation distribution (e.g. links to industry analyst reports,electronic roadshow distribution, etc.) to optimize and determine anyfurther final pricing adjustments, and establish final allocations as ofthe date and time of the close of the Bidstream build process.

Professional Services and Promotion

In determining the relative roles of the investor and any third partypromoter, the legal form of the relationship is not controlling. Again,the economic realities (or context) should be considered in assessingwhether the efforts of a promoter before the investor's purchase of acontract or other instrument can be considered in determining whetherthe investor was dependent predominantly on the efforts of the promoter.In the case of an embodiment in the U.S., the promotion is essentially acollection of data from the potential investment community and,typically, the promoter neither runs the offering and/or sale of thesecurities (as is the case of the issuer and/or underwriter) normanages, controls, or operates the enterprise.

Operation of embodiments might be considered by some as a specialselling effort/method. This is another reason for pre-filing disclosureof the plan of distribution, using the system and in coordination withthe SEC staff, on the acceptability of the implementation of theanticipated embodiments and its description in registration statementdocuments and prospectuses (or their equivalents).

Those Issuer Groups introducing embodiments of the system might begenerally advised to seek communications with the SEC to obtain aNo-action letter.

Anti-Trust & Liability Considerations

Another advantage to the underwriter in using the present system is thatthe price and the allocation distribution is principally not set by theunderwriter syndicate, but by the public itself—mitigating oreliminating any liability that could be derived by allegations ofmonopoly-driven or collusive price fixing, and the varieties ofallegation of allocations abuses that are driving an increasing numberof lawsuits. This assumes that the underwriter syndicate is not abusingthe system itself by withholding an inordinate amount of the totaloffering through implementation of the embodiment that allows forsignificant set-asides (whether disclosed or not).

Implementation of the system can act as an automated, impartialgatekeeper to protect against unfairly influencing the development of anefficient price and the fair and equitable distribution ofallocations—arguably mitigating some of the civil liability exposure ofthe underwriter syndicate and broker-dealers.

The system might result in wider distribution of smaller allotments, asthe system opens fair, affordable, and equitable pricing and opportunityfor ownership to the general, long-term investing public. Arguably,wider distribution of smaller allotments would also result in lowerafter-market volatility (assuming that the system is efficient inpricing optimization). Ideally, the after-market price might move littleor not at all, to the relief of the issuing entity. Over a longer periodof time, wider distribution of smaller allotments would also diminishvolatility because moves made by individual investors for their ownpersonal or portfolio needs would have less impact or influence onvolatility than institutional investors, who might sell large blocks forpurely exogenous and spurious factors having nothing to do with theissuer itself. Lower volatility would also benefit the issuer in thatmanagement could concentrate on building long-term shareholder value,instead of after-market price maintenance efforts.

Although this disclosure describes in detail certain embodiments, andhas provided numerous illustrative examples, it is also the case thatcertain variations, combinations, and modifications are also within thescope of the System, including but not limited to: (1) derivatives andderivative works of the system; (2) additional embodiments using one ormore components of the system; and (3) application of the systemtechniques, methods, and methodologies to applications beyond thesecurities industry and its related affiliated and associated industriesand businesses. This description is illustrative, not limiting; furthermodifications will be apparent in light of this disclosure and areintended to fall within the scope of the appended claims.

1. Method for offering a plurality of units intended to be sold at aboutthe same time, comprising the acts of: accepting a plurality ofindications-of-interest to buy the units, each indication including arequest for a quantity of the units at a particular price level;providing to a plurality of prospective buyers a display of the acceptedindications; accepting additional indications after providing thedisplay; and at a predetermined time, stopping the accepting ofadditional indications and treating the indications as an order book. 2.The method of claim 1, wherein a plurality of indications are acceptedfrom one entity.
 3. The method of claim 1, wherein the display includesa representation of the quantity of indications accepted over time. 4.The method of claim 1, wherein the price level is an interest yield. 5.The method of claim 1, wherein an accepted indication is predeterminedas being binding.
 6. The method of claim 1, wherein an acceptedindication is predetermined as being non-binding.
 7. The method of claim1, wherein the act of accepting additional indications includescanceling or modifying an earlier accepted indication.
 8. The method ofclaim 1, wherein the number of units available at a particular pricelevel or interest yield is predetermined.
 9. The method of claim 1,wherein the units are securities.
 10. The method of claim 9, wherein theunits are debt or equity securities.
 11. The method of claim 1, whereinthe units are securitized assets or contracts or rights.
 12. The methodof claim 1, wherein the units are units of goods or services.
 13. Themethod of claim 1, wherein the display is provided to an agent of aprospective buyer of the units.
 14. The method of claim 1, wherein thedisplay for each accepted indication displays along a first axis theprice and along a second axis the quantity.
 15. The method of claim 1,wherein the display for each accepted indication displays along one axisthe quantity and along a second axis the interest yield.
 16. The methodof claim 14, wherein the display displays along a third axis anadditional aspect of each indication.
 17. The method of claim 1, furthercomprising the act of allocating the units amongst the acceptedindications.
 18. The method of claim 17, wherein the allocation is bythe quantity of units, the price, or value of an indication.
 19. Themethod of claim 1, further comprising the act selling all units at thesame price per unit.
 20. The method of claim 19, wherein at least someof the units are sold at a price other than a price level set in theindication.
 21. The method of claim 1, further comprising the act ofselling units at different prices to different buyers.
 22. The method ofclaim 1, wherein the indications are submitted via a computer orcommunications network.
 23. The method of claim 1, further comprisingthe acts of: determining if the accepted indications are for a totalquantity of the units in excess of a predetermined number; andallocating units amongst the accepted indications.
 24. The method ofclaim 23, wherein the allocating includes providing additional units.25. The method of claim 23, wherein the act of allocating includes:canceling at least part of an indication which specifies a lower priceor higher interest yield.
 26. The method of claim 1, further comprisingthe act of selling the units at the price level set in each acceptedindication.
 27. The method of claim 1, further comprising the acts of:accepting a second plurality of indications to buy units of a secondtype; and providing a display of the accepted indications for units ofthe second type along with the display of the accepted indications forthe units of the first type.
 28. The method of claim 1, furthercomprising making at least some of the units available only to apredetermined entity.
 29. The method of claim 20, wherein the units forthe predetermined entity are sold for a predetermined price per unit orfor a total predetermined amount.
 30. The method of claim 28, whereinthe units for the predetermined entity are sold for a price related tothat of units sold to other buyers.
 31. The method of claim 1, furthercomprising the acts of: canceling an accepted indication; andtransmitting a message indicating the cancellation to the entity thatsubmitted the cancelled indication.
 32. The method of claim 31, furthercomprising the act of transmitting a message to a submitter of anindication regarding a status of the indication.
 33. The method of claim32, wherein the message is transmitted periodically.
 34. The method ofclaim 1, wherein the display includes a representation of anormalization of the accepted indications.
 35. The method of claim 1,wherein the display includes a representation of previous offerings ofsimilar units.
 36. The method of claim 1, wherein the display includes arepresentation of indications exceeding a predetermined size.
 37. Themethod of claim 1, wherein the display includes a representation ofthere being accepted indications associated with a plurality of types ofentities.
 38. The method of claim 1, wherein the display includes arepresentation that is static, iterative, or a simulation.
 39. Themethod of claim 1, wherein the display is specific to a particularsubmitter of an indication.
 40. The method of claim 1, wherein thedisplay includes information in addition to the accepted indications.41. The method of claim 40, wherein the additional information is acalculator.
 42. The method of claim 1, wherein the display includes arepresentation of there being accepted indications exceeding the numberof available units.
 43. The method of claim 1, wherein the displayincludes a representation of a price spread between acceptedindications.
 44. The method of claim 1, wherein the display includes arepresentation of changes in price over time of the acceptedindications.
 45. The method of claim 1, wherein the display includes arepresentation of a projected set of indications.
 46. The method ofclaim 1, wherein the representation includes a representation of theoutcomes of game theory-based scenarios.
 47. The method of claim 1,wherein the method is carried out as a simulation.
 48. The method ofclaim 1, wherein the display identifies the submitter of at least onedisplayed indication.
 49. The method of claim 1, further comprising theact of setting a sales price of the units from a function of all theaccepted indications.
 50. The method of claim 49, wherein the functionincludes taking an average of the accepted indications.
 51. The methodof claim 34, the function further including adjusting the average to setthe sales price.
 52. The method of claim 51, wherein the average is aweighted average.
 53. The method of claim 26, further comprising the actof setting a threshold price for indications-of-interest.
 54. The methodof claim 1, further comprising the act of rewarding submitters ofindications-of-interest that are earlier in time.
 55. The method ofclaim 54, wherein the reward is a more favorable sales price.
 56. Themethod of claim 1, further comprising the act of not accepting anindication that fails to meet a predetermined condition.
 57. The methodof claim 1, further comprising the acts of: generating anindication-of-interest using a computer implemented program; andsubmitting the generated indication-of-interest.
 58. The method of claim1, further comprising the act of adding information to the displayreflecting other than accepted indications.
 59. The method of claim 1,further comprising the act of varying a number of the units availablefor purchase, responsive to the accepted indications.
 60. A computerreadable medium having computer instructions thereon for performing themethod of claim
 1. 61. Method for an indication-of-interest to buy atleast one of plurality of units intended to be sold at about the sametime, comprising the acts of: viewing a display ofindications-of-interest to buy including a price and a quantity of unitsto be sold of the units; submitting an indication-of-interest to buy theunits, the indication including a price level and a quantity of theunits to be purchased; having the opportunity to submit an additionalindication or change the indication; and at a predetermined time, theopportunity to submit an additional indication or change the indicationbeing stopped and the indication being accepted.
 62. A computer enabledsystem for offering a plurality of units, comprising: a database forholding a plurality of indications-of-interest to buy the units, eachindication including a request for a quantity of units at a particularpure level; and a participant module operatively coupled to the databasefor accepting the indications from prospective buyers; wherein thedatabase provides to a plurality of the prospective buyers a display ofthe accepted indications.